The highly anticipated event, hosted by The New York Times, featured an exclusive interview with the renowned entrepreneur and CEO of SpaceX and Tesla, Elon Musk. During this candid interview, Musk didn’t shy away from expressing his views on a spectrum of topics, igniting controversy with his outspoken remarks. One particularly contentious moment arose when Musk addressed the absence of Disney’s advertising presence on a certain platform, X, which was labeled as “anti-Semitic.” Musk, in a bold move, directly called out Disney CEO Bob Iger for this decision, asserting that he didn’t require Disney’s advertising on his platform X. This bold and unfiltered comment swiftly caught attention, leaving audiences and industry insiders intrigued and eagerly awaiting Disney’s formal response.
However, following this episode, Walmart also joined Disney in not advertising on X platform on December 1, 2023, stating that they get better customer reach on other social media platforms.
Ackman came to Musk’s rescue
Renowned billionaire investment manager and an investor in the platform X, Bill Ackman, emerged as a supporter of Elon Musk amid the platform’s ongoing challenges. In a noteworthy X post, Ackman boldly highlighted the prevalence of problematic content, including instances of antisemitism and other contentious material, across rival social media platforms such as TikTok, Facebook, and Instagram. He highlighted the hypocrisy that despite harboring substantial volumes of problematic content, these platforms continued to enjoy robust advertiser backing. Additionally, Ackman put forth a thought-provoking and unconventional proposal concerning the future ownership structure of X. He suggested a visionary idea wherein the ownership of the platform could potentially be distributed among the American populace, envisioning a scenario where each American citizen would be allotted a single share in the platform. This novel proposal aimed to safeguard the platform’s fundamental commitment to free speech.
Ackman’s endorsement of Musk’s position and his innovative suggestion regarding the platform’s ownership model resonated across the digital landscape, sparking discussions about the balance between free speech and responsible content moderation in online spaces. The proposal to distribute ownership among the public opened doors to new debates about democratizing the governance of social media platforms and ensuring a more inclusive and participatory approach toward safeguarding free expression while addressing the challenges posed by problematic content.
Amidst ongoing controversies and financial challenges, Ackman’s stance and unconventional proposal added a new dimension to the discourse surrounding online platforms, highlighting the complexities of maintaining free speech principles while handling the responsibilities of content moderation in today’s digital age.
What does this mean for the platform financially?
The platform X faces a dire financial predicament, potentially forecasting a colossal loss of up to $75 million in revenue by the year’s end. The situation escalated following reports from The New York Times, indicating that approximately 200 prominent companies, including industry giants such as Airbnb (ABNB), Amazon (AMZN), Coca-Cola (KO), and Microsoft (MSFT), have either halted their advertising campaigns or are contemplating withdrawing their ads from the platform. This mass exodus of advertisers poses a significant threat to X’s financial stability. Initially, X had estimated potential revenue losses closer to $11 million. However, this will drastically shift following Elon Musk’s highly controversial interview at a recent event. Prior to this period, X had been battling ongoing challenges in generating substantial ad revenues. In response, Musk sought to address this issue by recruiting Linda Yaccarino, the former Head of Advertising at NBC Universal, known for her expertise in navigating complex advertising landscapes. Her appointment signaled a strategic move aimed at bolstering X’s advertising capabilities and countering the persistent struggles the platform faced in attracting advertisers.
Advertising revenue trends of X since Musk bought it in October 2022
Since Elon Musk assumed control of the platform formerly known as Twitter and rebranded it as X, the platform experienced a staggering decline in U.S. ad revenue, plummeting by an alarming 55% compared to the previous year. Musk’s arrival brought an aura of uncertainty, triggering a whirlwind of rapid changes within the company. These swift alterations, implemented at an exceptionally high pace, left advertisers uneasy and apprehensive about the platform’s stability and reliability. The rapid pace of transformation instigated doubts among advertisers, leading to a wave of hesitancy and second thoughts about maintaining their partnerships with the platform. As of August 2023, the U.S. ad revenue for X continued its downward spiral, declining by a staggering 60% year over year. Despite the concerning trend, X remained silent, offering no official comments or statements on the issue. Elon Musk, however, addressed the declining ad revenue problem by attributing it to pressure from activists. He specifically accused the Anti-Defamation League (ADL) of being the primary catalyst behind the drop in ad revenue.
Musk’s bold assertion sparked controversy as it directly implicated the influential organization in the platform’s financial downturn. However, a week later, the Anti-Defamation League rebuffed Musk’s allegations, vehemently denying any involvement in causing ad revenue losses for X. In a firm response, the ADL clarified that their actions did not contribute to the platform’s financial decline. In a surprising turn, the organization expressed its readiness to initiate advertising campaigns on the platform, aiming to spread its message of combating hate both to X and its user base. This unexpected move signaled a potential collaboration between the Anti-Defamation League and the platform, suggesting a shift toward addressing issues of hate speech and fostering a more inclusive online environment.
Who is benefitting from this?
Amid increased scrutiny on brand safety concerns within the advertising landscape, there’s a spotlight on advertising technology firms specializing in offering solutions to address these issues. Companies like Integrated Ad Science (IAS) and DoubleVerify (DV) are predicted to witness a surge in demand for their services due to their expertise in ensuring brand safety. Investors are keenly observing these developments and reacting accordingly to the potential growth prospects of these companies. The shares of IAS exhibited a notable increase of approximately 2.5% over the week and have surged by an impressive 63% since the beginning of the year. Similarly, DoubleVerify experienced a rise of about 4.4% in share value over the week and has seen an impressive year-to-date increase of nearly 53.4%.
The heightened attention on brand safety issues has sparked renewed interest in the solutions provided by these advertising technology firms. As brands and advertisers prioritize safeguarding their reputations and content integrity, companies specializing in ensuring brand safety measures stand poised to reap significant benefits. This increased demand and investor confidence indicate the growing significance and market potential for these firms offering crucial brand safety services in an evolving and increasingly digital advertising landscape.
There has been a noticeable shift in advertising strategies among companies, particularly in their choices of social media platforms. Several companies have opted out or contemplated withdrawing their association with X (formerly known as Twitter) as a social media advertising platform. This shift has led them to explore alternatives like Meta (formerly Facebook) and Snap, as these platforms stand to gain significantly from the absence of X, one of their major competitors.
The decision to boycott X as an advertising platform isn’t solely due to the prevalence of hate speech, which is unfortunately common across many social media platforms. X, however, has been thrust into the spotlight for several reasons, primarily revolving around the highly turbulent changes initiated by its CEO, Elon Musk. His controversial acquisition and subsequent actions significantly impacted X’s credibility and reliability in the eyes of advertisers. One pivotal factor influencing advertisers’ decisions is brand safety. Advertisers strive to ensure their brands are showcased in environments that align with their values and maintain a positive public image. However, after Musk’s acquisition, X experienced a shift in its perceived environment, creating concerns among advertisers regarding the platform’s suitability for promoting their brands.
The erratic nature of changes, along with uncertainties surrounding X’s direction under Musk’s leadership, raised doubts about the platform’s ability to provide a conducive and favorable environment for advertisers. This unease led to a loss of trust and confidence, prompting advertisers to reevaluate their advertising strategies and seek alternative platforms offering a more stable and brand-friendly atmosphere.
In essence, the increased scrutiny and subsequent withdrawal of advertisers from X can be traced back to the fundamental issue of brand safety and the perception of an unfavorable environment for advertising due to the turbulent changes and uncertainties surrounding the platform following Elon Musk’s controversial acquisition. As a result, competitors like Meta and Snap stand to gain significantly from this shift in advertisers’ preferences.
Written by – Ruchika Kothari
Edited by – Yashvi Vasani