It seems that Elon Musk would sooner burn the platform formerly known as Twitter to the ground than change his ways, as he’s once again demonstrated how he just cannot seem to get out of his own way as he goes about re-building the app.
As a quick recap of the current X ads situation:
Back in July, Musk said that X’s ad revenue was down 50% year-over-year due to various factors related to his takeover of the app, market trends, etc. Twitter brought in $3.96 billion from ads in 2022, so X, at that rate, was likely on track to being in around $2 billion in ad revenue for 2023.
Musk further noted that X’s ad revenue had declined again by October, with U.S. ad revenue, X’s biggest ad market, down 60% YoY.
In early November, two independent reports were published which demonstrated that X is displaying ads next to offensive content, while Musk also amplified an anti-Semitic talking point via his own X account
A range of big-name brands announced that they would be halting X ad spend as a result, more so due to Musk’s comments than the independent report. In response, Musk launched legal action against one of the report authors for harming the business.
So, things are not great for X’s ad business, and Elon, up till now, had not apologized or even acknowledged the post noted above, which was the main catalyst for this new advertiser boycott. And that boycott is still growing every day, as more advertisers wean themselves off the platform, which is further eating into X’s ad revenue in what should be its biggest revenue period of the year.
So today, with all of this on the line, in front of a huge crowd of potential ad partners at the New York Times DealBook Summit, Elon had a chance to clarify his stance, to make amends for past ills, and to provide more insight into his vision for X.
And he did, kind of, but then…
First, in addressing the anti-Semitic post, Musk did in fact apologize.
“I mean, look, I’m sorry for that post. It was foolish of me. Of the 30,000 it might be literally the worst and dumbest post I’ve ever done. And I’ve tried my best to clarify six ways from Sunday, but you know at least I think it’ll be obvious that in fact far from being antisemitic, I’m in fact philosemitic.”
I mean, it’s not the best framing for an apology, and somewhat misses the point, that what he shares does matter, as he has a huge audience online, so it’s less about saying “I’m not anti-Semitic” than what he actually does with that platform.
But then, in what is bound to be one day regarded as a milestone moment, which will haunt him, X CEO Linda Yaccarino, and every investment partner in the app for some time, Musk said this (language warning):
The final ‘Hey Bob’ was seemingly aimed at Disney CEO Bob Iger, one of several brands that’s all but halted its X activity as a result of Musk’s comments. I’d be tipping that all Disney-owned profiles in the app, including those associated with ESPN, Marvel, 20th Century Fox, and more, will be going dark on X from today.
And you can only imagine what Linda Yaccarino, who’s been working to build bridges with advertisers, and assure them that X is listening, and does care about their concerns, would have been thinking as she watched on from the crowd.
It’s a shocking, but also unsurprising proclamation for Musk, though when your company is reliant on ad dollars to survive, it’s not exactly the sign of a genius business approach.
And while X is pushing users towards subscriptions as an alternative revenue stream, in the hopes of gaining more power in any related debates with ad partners, its total subscription revenue is still only a tiny part of its broader revenue pie.
At present, X looks set to bring in around $600 million from subscriptions and data sales in 2023. Again, versus $2 billion from ads.
The ad industry tends to not respond well to individual platforms looking to defy industry norms, and while making such comments might win Musk more adoration of his legion of “free speech” enthusiasts, the impacts on X are likely to be far more significant. So he’s either very confident that he can find alternative funding to keep X running, even with a significant reduction in ad spend, or he’s fine with letting it crash, as a statement, maybe, as a monument to the control of the mainstream media machine.
I don’t know, no one does, and I think we’re all scratching our heads, trying to work out what Musk’s 4D chess strategy is in this case, because historically, he’s been able to flip the switch, and turn on his more earnest media personality in big interviews like this.
It seems that now, he’s not going to put on a front, which is going to make it very, very difficult for Yaccarino and her team to convince ad partners that X is working to provide them with a safe, responsive, beneficial experience.
Musk has essentially said that he doesn’t care what they think, you either advertise on X under his rules, or you don’t.
The problem for Musk is that X is not an essential ad platform, for any business, and now, he’s giving every brand reason to assess whether they even need it. And as more profiles reduce their posting output in the app, both paid and organic, it’s losing its value in this respect every day.
So while Musk is telling advertisers what they can do, I suspect it’s him who’ll be feeling the pain of that defiance for some time yet.