LDN - Business

After Musk tirade, X faces prospect of more advertisers fleeing

[December 01, 2023] By Sheila Dang, Chavi Mehta and Jaspreet Singh

(Reuters) -Social media company X faces the prospect of more advertisers fleeing and has no clear fix in sight, ad industry experts said, after billionaire owner Elon Musk lashed out at some of the biggest brands for dropping the platform.

Walt Disney and Warner Bros. Discovery suspended advertising on X earlier this month following Musk's endorsement of an antisemitic post that falsely claimed members of the Jewish community were stoking hatred against white people.

After apologizing for his post while speaking at a New York Times DealBook event on Wednesday, Musk unleashed a profanity-laced tirade against advertisers for fleeing the platform and accused the brands of "blackmail."

He appeared to single out Walt Disney CEO Bob Iger, who spoke earlier at the event and said an association with X was "was not a positive one for us."

"Companies need to protect the brands they work for," said Lou Paskalis, founder of marketing consultancy AJL Advisory and former head of global media at Bank of America. "This isn't advertisers getting together in a secret clubhouse to support an agenda."

In a memo to employees on Thursday, which was seen by Reuters, X Chief Executive Linda Yaccarino said Musk's interview was "candid and profound," and encouraged staff to watch it. She reiterated that X's mission is to be an open platform without censorship.

"Our principles do not have a price tag, nor will they be compromised - ever," the memo said.

The Tesla chief also acknowledged that an extended boycott by advertisers could bankrupt X, formerly Twitter, but suggested that the public would blame the brands and not him for a potential collapse.

However, Insider Intelligence analyst Jasmine Enberg said: "If anyone is killing X, it's Elon Musk - not advertisers."

"Should X collapse, an autopsy would reveal a series of platform policy decisions, staffing cuts, tweets and antagonistic comments by Musk that have driven away X's primary source of revenue," Enberg said.

An executive at a major global ad-buying firm, who declined to be named, said only one major client was continuing to advertise on X.

"(Musk) seems to be hell bent on destroying the platform," the executive said.

X risks not only losing corporate advertisers, but also money from political candidates, a revenue stream that reopened after the platform lifted a ban on political ads. U.S. political ad spending in 2024 - when a presidential election will be held - is expected to reach a record $10.2 billion, according to AdImpact, which tracks political ads.

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Tesla and SpaceX's CEO Elon Musk pauses during an in-conversation event with British Prime Minister Rishi Sunak in London, Britain, Thursday, Nov. 2, 2023. Kirsty Wigglesworth/Pool via REUTERS/File Photo

Mike Nellis, CEO of Authentic, a digital marketing agency that works with Democratic candidates including U.S. President Joe Biden, said he planned to speak with all his clients about whether or not to spend on X.

"Telling major advertisers and Bob Iger to go F themselves might be the final nail in the coffin," Nellis said.

X has come under fire for lax content moderation, especially from advertisers who do not want their ads appearing next to inappropriate content.

Ad spending on X in the United States from January through October this year declined 64%, compared with the same period in 2022, according to data from media analytics firm Guideline, which tracks advertising spending data from major ad agencies.

"We believe there is a risk that more companies will stop advertising on X; at least on a short-term basis," D.A. Davidson & Co analyst Tom Forte said.

"It is fair to say this makes the company's subscription efforts more important and potentially means it may need more than half its revenue to come from subscriptions," he said.

U.S. monthly active users also declined by about 19% since Musk acquired Twitter last year, according to research firm Data.ai.

Apple, IBM, Sony , Disney, Comcast including NBC Universal, and Paramount collectively accounted for 7% of total U.S. ad spend on X through October this year, Sensor Tower data showed.

At a dinner hosted by the New York Times following the DealBook Summit on Wednesday, guests that included representatives of major brands were "aghast" at witnessing Musk's expletives against advertisers, said one attendee who declined to be named.

One sentiment seemed to be shared among brand representatives in discussing X: "It's obvious (Musk) doesn't want us there and we don't want to be there," the attendee said.

(Reporting by Chavi Mehta and Jaspreet Singh in Bengaluru; Additional reporting by Aby Jose Koilparambil and Sheila Dang; Editing by Anil D'Silva and Deepa Babington)

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