After Elon Musk’s recent outburst at the New York Times DealBook event, where he criticized major media companies for pulling their ads from his social media platform X (formerly Twitter), analysts predict an increased exodus of advertisers.
Companies like Walt Disney and Warner Bros. Discovery had already suspended advertising on X following Musk’s endorsement of a controversial post. Musk’s subsequent apology and profanity-laced tirade against these advertisers at the event are expected to exacerbate the situation.
Insider Intelligence analyst Jasmine Enberg stated that Musk, rather than advertisers, is primarily responsible for any potential collapse of X. The platform’s lax content moderation and Musk’s antagonistic approach drive away its main revenue source. Ad spending on X in the U.S. has already seen a significant decline, with a 64% drop from January through October this year compared to 2022. This data raises concerns about the platform’s financial health and ability to retain advertisers.
With the possibility of more companies halting their advertisements, X’s reliance on subscription revenue becomes more crucial. However, this shift may require the platform to generate over half of its revenue from subscriptions, a challenging feat considering the reported 19% decline in U.S. monthly active users since Musk’s acquisition. The departure of prominent advertisers, who accounted for a substantial portion of U.S. ad spending on the platform, could force X to rely more on smaller advertisers.
Potential Long-term Repercussions for X
Musk’s admission that X is worth less than the $44 billion he paid for it further complicates the platform’s future. If large brands continue withdrawing, recovering X’s valuation could be increasingly difficult. The platform’s ability to attract and maintain smaller advertisers will be crucial, but Musk’s recent comments could significantly hinder these efforts. Investment director Russ Mould from AJ Bell highlights the difficulty in changing this trajectory, especially if advertisers are deeply offended by Musk’s remarks.
Elon Musk’s confrontational stance and the ongoing advertising withdrawal could significantly impact X’s financial stability and prospects. The platform’s reliance on subscriptions and smaller advertisers in the face of declining user engagement and major brand departures presents a challenging path ahead.
