Sociable: Musk's Fiery Response to Advertisers and Accusations of Boycott
Elon Musk defends his stance against advertisers and labels the boycott of X as blackmail, following an interview at the New York Times DealBook Summit X's owner apologizes for offensive posts but questions the advertisers' response
The latest commentary on significant social media trends and developments, "Sociable," is written by industry expert Andrew Hutchinson of Social Media Today.
Elon Musk recently demonstrated his unwavering commitment to his ways by refusing to change the platform formerly known as Twitter, even going so far as to rebuild the app in the process.
To quickly summarize the current X ads situation:
In July, Musk mentioned that X's ad revenue had decreased by 50% year-over-year due to factors related to his acquisition of the app, market trends, and other reasons. Twitter generated $3.96 billion from ads in 2022, so X was likely on track to earning around $2 billion in ad revenue for 2023.
In October, Musk mentioned that X's ad revenue had once again dropped, with U.S. ad revenue, the company's largest ad market, down 60% year over year. Additionally, two separate reports in early November revealed that X was showcasing ads alongside offensive content. At the same time, Musk himself perpetuated an antisemitic argument through his own X account.
Several well-known brands have announced halting their ad spend on X, citing Musk’s comments as the main reason behind their decision. In response, Musk has taken legal action against one of the report authors for allegedly damaging the company's reputation. As a result, X's ad business is facing significant challenges, exacerbated by the growing number of advertisers joining the boycott. This is affecting X's ad revenue during what should be its peak revenue period. Musk, on the other hand, has not addressed or apologized for his initial comments that sparked the advertiser boycott.
At yesterday's New York Times DealBook Summit, Musk was faced with the opportunity to address his position and share his vision for X with a large audience of potential ad partners. Despite making some attempts to clarify his stance and offer insight, it ultimately left much to be desired.
Musk apologized for the antisemitic post, stating, "I'm sorry for that post. It was foolish of me and may be the worst and dumbest post I've ever made out of 30,000. I've tried to clarify, but I believe it's obvious that I am not antisemitic, but rather supportive of the Jewish community."
The framing of the apology is not ideal and overlooks the importance of his actions, given his large online audience. It's not just about saying "I'm not antisemitic" but what he does with his platform. However, Elon Musk's comments are likely to be considered a significant and regrettable moment that will affect him, X CEO Linda Yaccarino, and all the investment partners in the app for a while. Musk said the following (warning: strong language):
The last “Hey Bob” appeared to be directed at Disney CEO Bob Iger, who is among the many brands that have essentially stopped their X activities due to Musk’s remarks. I wouldn’t be surprised if all Disney-owned profiles on the app, including those related to ESPN, Marvel, 20th Century Fox, and others, will go dark on X starting today.
As Linda Yaccarino worked to establish connections with advertisers and reassure them that X is attentive to their concerns, it's easy to imagine her thoughts as she watched from the crowd. Musk's proclamation is shocking, but not entirely surprising, considering his company's reliance on advertising revenue. It's not the most strategic approach for a successful business.
X is actively encouraging users to opt for subscriptions as a secondary source of income, in order to strengthen its position in negotiations with advertising partners. Despite this effort, its overall subscription revenue remains quite insignificant compared to its total revenue. It is projected that in 2023, X will generate approximately $600 million from subscriptions and data sales, a stark contrast to the $2 billion it will earn from ads.
The advertising industry isn't likely to respond positively to individual platforms that challenge the industry's norms. Although Musk may gain more support from his followers for his comments, the effects on X could be significant. It's unclear if Musk is confident in finding alternative funding for X or is willing to let it fail as a statement against mainstream media control. Musk's strategy is confusing and has everyone wondering, as he has previously been able to shift to a more serious media personality in big interviews.
It appears that he has decided not to pretend anymore, and this will make it extremely challenging for Yaccarino and her team to persuade ad partners that X is committed to offering them a secure, efficient, and rewarding experience. Musk has made it clear that he is unconcerned with their opinions - either advertise on X according to his terms, or don't advertise at all.
Musk faces a challenge as X is not a crucial advertising platform for businesses, leading brands to question its necessity. With dwindling engagement and content output, the platform's value is diminishing. Despite Musk's directive to advertisers, he may be the one experiencing the consequences of their defiance.
