Major Advertisers Pull Out of X, Which Could Spark a Larger Shift Away From the App

While Elon Musk and X CEO Linda Yaccarino have repeatedly lauded the indisputable fact that their X project is “not boring”, I’m pretty sure that the events of this week would have them each relieved to see a period of relative boredom heading into the vacation break.

Though that, in fact, seems unlikely.

This week, X has been hit with a brand new raft of challenges, mostly stemming from Musk’s own statements and public stances on various issues.

To recap, throughout the week:

• A brand new third-party evaluation report suggested that X just isn’t doing enough to combat misinformation across the Israel-Hamas war, which is actually supported by X’s own enforcement numbers
• Based on this, and other reports, the European Commission announced that it might stop promoting on X, because of “widespread concerns regarding the spread of disinformation”
• The next day, IBM also announced that it might halt all promoting on X because of this of a brand new report from Media Matters which showed that X is placing paid promotions alongside pro-Nazi material in-stream
• On that very same day, Musk amplified and supported an anti-Semitic talking point on X, which has been linked to numerous attacks on Jewish people over time (SMT is not going to be repeating the small print of this)
• Because of this of Musk’s post, several big-name advertisers have now announced that they’ll even be pausing their X ad campaigns, including Apple, Lionsgate, Disney, and more. The list of advertisers joining this latest boycott is growing by the hour
• A federal judge also rejected an attempt by X to overturn an FTC advantageous of $150 million (stemming from actions under previous Twitter management)
• On one other front, an industry watchdog has called on the FTC to look at X’s latest ad formats, a few of which are usually not clear enough of their disclosure. That could lead on to a brand new investigation into X’s ad practices

So, yeah, it hasn’t been a terrific week for Elon and Co., and their newly free-speech-aligned X app, which is now significantly more reliant on crowd-sourced moderation, via Community Notes, to administer key tasks. Which, based on a growing variety of investigations, is clearly not able to handling such.

Though that, in fact, just isn’t even the most important concern, with Elon’s own commentary taking the mantle for X’s central business problem this week.

Elon has long been defiant on this front, repeatedly stating that he’ll say what he wants within the app, even when it means losing money because of this.

And it does seem that he’s about to learn the way expensive his commentary could be. As a reminder, X’s ad revenue is already down at the very least 50% on last 12 months, so any lack of a significant brand partner will probably be significant, when it comes to the continuing viability of the app.

Because despite the fact that Musk has cut costs significantly, by culling 80% of staff, shutting down data centers, selling off Twitter-branded artifacts, and more. Even with all that in mind, X continues to be riding the road on profitability.

In a recent interview, Yaccarino said that X might be near turning a profit in early 2024, though that claim was also based on 90% of the app’s top 100 advertisers having returned to the platform in recent months.

Now, a lot of them are leaving once more. And with Apple making an enormous statement by announcing its decision to halt X ads, it’s now expected that many more big names will follow suit.

And all of the while, Meta’s alternative real-time app Threads continues to grow, and grow to be an even bigger place for news discussion, especially amongst journalists, a gaggle that Musk continues to deride, actively dissuading them from staying lively on his platform.

Which is also one other element that continues to harm X’s recovery efforts, with Musk also taking the chance to attack IBM for its decision to halt X ads, amongst his ongoing attacks on “legacy media”. Which is a narrative that Musk continues to drive, that nobody really has an issue with anything that he’s saying, but that traditional media, which is in competition with X for ad dollars, is colluding to stop him, and destroy his free speech push.

Which is just not true, is unfounded, and never a viable theory in any way. Many big-name brands, like Apple, have actually stuck with X, despite Musk’s ongoing antics. But now, it’s his statements and stances which have driven them away.

It’s not a media narrative, nor a conspiracy to quell the “real truth”.

The one person responsible for X’s troubles is Musk himself.

Which goes to cost him money, which, as noted, Musk has said that he’s advantageous with. But together with his advertiser pool shrinking, that would quickly grow to be an existential threat for the app, if Yaccarino and Co.’s damage control efforts are usually not capable of stem the rising tide.

And it does feel like a tide this time, it appears like many are viewing this because the last straw. Indeed, even some major Tesla investors have declared Musk’s latest comments as a step too far, and are advising their clients to tug out of his projects.

Will or not it’s a significant turning point, for Musk and/or X? Will it fuel the rise of Threads as a real X rival?

In some ways, it already has, while Musk, in his own, stubborn way, seems to have begrudgingly acknowledged that his comments could have caused offense.

He hasn’t apologized, nor taken a backwards step. But that next step is probably going the one way out of this mess at this stage.

Can Musk actually try this? Will his ego allow him to step forward, admit that he was unsuitable, and take steps to rectify the situation?

And if he does, will that be enough to bring ad dollars back?

Heading into the most important ad spending period of the 12 months, Musk’s statements are horrendous, from all perspectives.

Could they be the start of the top of X?