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Brand exodus from X expected after Elon Musk’s verbal attack

TL;DR

  • Elon Musk’s recent verbal attack at a New York Times event is likely to cause more advertisers to withdraw from his social media company, X (formerly Twitter).
  • Major companies like Walt Disney and Warner Bros. Discovery already suspended advertising following Musk’s endorsement of an antisemitic post.
  • Musk acknowledged the risk of bankruptcy for X due to the advertiser boycott, but blamed the brands for potential collapse.

The corporate landscape around Elon Musk’s social media venture, X (formerly known as Twitter), is becoming increasingly turbulent. Following Musk’s controversial remarks at the New York Times DealBook event, industry analysts are predicting a further decline in advertiser confidence.

This speculation arises in the aftermath of Musk’s sharp criticism of major media players who have withdrawn their advertisements from the platform.

A Tumultuous Turn for X’s Advertising Sphere

Musk’s recent outburst, which included a profanity-laden critique of the departing advertisers, has intensified concerns about the platform’s viability. Companies like Walt Disney and Warner Bros. Discovery had already suspended their advertising earlier this month, triggered by Musk’s support of an antisemitic post.

This move marks a significant shift in the platform’s relationship with key advertisers, who are increasingly distancing themselves due to content moderation concerns and Musk’s unpredictable leadership style.

The Tesla CEO also candidly acknowledged the potential financial peril for X, admitting that a prolonged advertiser boycott could lead to bankruptcy. Yet, he suggested that the blame for such a collapse would fall on the brands rather than on his own actions.

However, Jasmine Enberg, an analyst at Insider Intelligence, counters this view, stating, “If anyone is killing X, it’s Elon Musk – not advertisers.” Enberg’s analysis points to a series of decisions and comments by Musk that have alienated the platform’s primary revenue source.

The Ripple Effects of Musk’s Leadership

The financial implications of Musk’s leadership style are already becoming evident. Data from media analytics firm Guideline reveals a stark 64% decline in ad spending on X in the United States from January through October this year, compared to the same period in 2022. This decline in advertising revenue poses significant challenges for the platform’s financial stability.

Analysts like D.A. Davidson & Co’s Tom Forte predict that more companies may cease advertising on X, at least temporarily. This shift emphasizes the increasing importance of subscription revenues for the company. Forte suggests that X might need to derive over half of its revenue from subscriptions, a significant pivot from its traditional ad-based model.

The user base has also been affected, with U.S. monthly active users dropping by about 19% since Musk’s acquisition.

This reduction is particularly concerning given that major advertisers like Apple, IBM, Sony, Disney, Comcast (including NBC Universal), and Paramount collectively contributed to 7% of X’s total U.S. ad spend through October this year, as per Sensor Tower data. If these large brands continue to retreat, X will have to rely more on smaller advertisers, which could further impact its revenue streams.

Russ Mould, investment director at AJ Bell, reflects on Musk’s own admission that X is worth significantly less than the $44 billion he paid for it. Mould argues that the platform’s value is unlikely to rebound quickly, especially if advertisers are deeply offended by Musk’s recent statements.

Elon Musk’s confrontational approach at the DealBook event may have far-reaching consequences for X. As major advertisers reassess their relationship with the platform, the company’s financial future hangs in the balance.

Musk’s recognition of the potential for bankruptcy highlights the gravity of the situation, underscoring the need for a strategic rethink in X’s business model.

Whether Musk’s leadership can steer the platform through these choppy waters remains to be seen, but the current outlook suggests a challenging road ahead for X.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Jai Hamid

Jai Hamid is a passionate writer with a keen interest in blockchain technology, the global economy, and literature. She dedicates most of her time to exploring the transformative potential of crypto and the dynamics of worldwide economic trends.

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