Elon Musk’s $44 billion takeover of X last year has been anything but smooth for the billionaire. Cutting the workforce by thousands, closing data centres, removing legacy blue ticks and appointing former NBCUniversal Advertisement Head Linda Yaccarino have been amongst the biggest changes introduced by Musk. He hoped it would help in turning around the fortunes of Twitter, which was stuck in a loss-making cycle. However, things haven't turned out the way he would have hoped.
An analysis by Reuters showed that the ad revenue of the platform has shrunk over 50 per cent year on year in every month since the takeover was completed. Musk had himself informed in July that the company still had negative cash flow due to heavy debt load and high losses in advertising revenue.
Despite the presence of Yaccarino, advertisers continue to desert the platform. While Musk bets on his premium subscription plan to reduce the dependence on advertisements, the company has still not found a viable path. The recent episode of antisemitism allegations against Musk leading to withdrawal of ads has once again brought the issue of strained trust to the fore.
Why Elon Musk’s X is Losing Advertisers
Advertisement revenue has been the backbone for X. It made up for 90 per cent of the company’s $5 billion revenue in 2021. A hit to ads hurt the company’s valuations massively. By the end of October this year, the company’s valuation had dipped to $19 billion, as per reports.
Within the month of Musk’s takeover, over half of X’s top 100 advertisers had left the platform, as reported by the watchdog group Media Matters. One of the primary reasons was the concern over content moderation policies of the platform. Musk had time and again criticised the policies of X under previous leadership and said that the platform needs to be a public square for opinion.
Following the takeover, several users had criticised the relaxation of X’s moderation policy. Platforms like Mastodon, Bluesky and Instagram’s Threads have propped up since then, vying to take away X’s market share. However, the number of users on X has remained between 200-250 million. In September 2023, a Similarweb report said that visits to the social networking site had fallen by 10 per cent compared to the previous month.
As an attempt to reduce dependence on ads, Musk has been talking about building a super app X which will work like the Chinese platform WeChat. Here, the firm aims to bring money transfer, food delivery and other services under one umbrella app, known as the ‘everything app’.
Also Read| All about Elon Musk's Everything App Plan
But the dwindling ad revenue has hit the company where it hurts. Amidst the Israel-Hamas war, Elon Musk has once again stirred up a controversy. A report by Media Matters had claimed that ads of several firms had appeared next to Nazi posts, ringing new alarm bells. Posts of Musk allegedly supporting an antisemitic tweet had also sparked outrage.
Following the report on Media Matters, IBM, Apple, Walt Disney and Warner Bros amongst several other firms had withdrawn their ads from the platform. Due to the controversy, several advertisement industry players reportedly asked Yaccarino to resign from her post. However, the former NBCUniversal head doesn’t appear to be in a mood to leave. In a post, she reaffirmed her faith in the direction of the company.
X has filed a lawsuit against Media Matters, alleging that the group “aggressively searched for such content to misrepresent user experience”. However, companies at the moment appear to be wary of Musk’s platform which has forced them to hold back their ads.
With no slowdown in controversies around the world’s second richest man, the hopes for a turnaround in X’s advertisement fortunes appear to be bleak.
