In a shocking turn of events, X, the social media company formerly known as Twitter, is facing a potential loss of up to $75 million in advertising revenue as more and more major brands suspend their marketing campaigns on the platform. This decline comes after X’s owner, Elon Musk, endorsed an antisemitic conspiracy theory, causing concerns about his behavior and the platform’s content moderation decisions to spread far beyond companies like IBM, Apple, and Disney, which had already paused their advertising campaigns. Internal documents reveal that over 200 ad units from companies like Airbnb, Coca-Cola, and Microsoft have either paused or are considering pausing their ads on X. The situation is dire for X, as these advertising freezes occur during the company’s traditionally strongest quarter, with holiday promotions usually boosting revenue. This article delves into the details of this significant loss and the potential consequences for X as it grapples with the fallout from Musk’s actions.
Advertising Revenue Loss
X, the social media company formerly known as Twitter, is facing a significant loss in advertising revenue. With concerns about Elon Musk and the platform spreading to major brands, X could potentially lose up to $75 million by the end of the year. Internal documents have revealed that more than 200 ad units have paused or are considering pausing their ads on X. However, X states that the figures viewed by The Times are either outdated or represent an internal exercise, and that only $11 million in revenue is at risk.
Impact on Fourth Quarter
The advertising freezes on X come at a particularly challenging time for the company, as it is traditionally their strongest quarter. Brands typically run holiday promotions during this time, with events such as Black Friday and Cyber Monday boosting advertising revenue. In the last quarter of 2021, X recorded a revenue of $1.57 billion, with nearly 90% of it coming from advertising. The loss of advertising revenue in the fourth quarter could have a significant impact on the company’s financial performance.
Hesitance to Advertise on X
Since Elon Musk’s acquisition of Twitter, now called X, some brands have been hesitant to advertise on the platform. Concerns about Musk’s behavior and content moderation decisions have led to a decrease in U.S. advertising on X by nearly 60% this year. In an effort to woo back advertisers, X’s CEO Linda Yaccarino is leading efforts to address these concerns and rebuild trust in the platform.
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Advertising Lapses
Over 100 brands have fully paused their ads on X, while dozens of others are at risk of doing the same. Many of these brands made the decision to pause their ads after Musk endorsed an antisemitic conspiracy theory. The advertising lapses have affected a wide range of brands, including major companies like Airbnb, Uber, Jack in the Box, Coca-Cola, and Netflix. These lapses in advertising have further contributed to the potential revenue loss for X.
Brands That Paused Advertising
Among the brands that have paused their advertising on X, Airbnb halted over $1 million worth of advertising, while Uber cut back on ads worth over $800,000. Jack in the Box, Coca-Cola, and Netflix also paused some of their campaigns. The decision to pause advertising comes as a response to Musk’s endorsement of an antisemitic conspiracy theory, which has generated public backlash and prompted brands to reconsider their association with X.
Advertisers Associated with Microsoft
Various subsidiaries of Microsoft have also stopped advertising on X. This represents a potential loss of over $4 million in revenue for X’s fourth quarter. The decision by Microsoft’s subsidiaries to halt their advertising on X further highlights the impact of Musk’s endorsement and the concerns surrounding the platform.
Other Brands Pausing Spending
In addition to Microsoft’s subsidiaries, other notable brands have also paused their spending on X. Amazon’s units for books and music have halted their advertising on the platform, as well as a subsidiary of Google. NBC Universal has also paused its spending but continues to post content on X. The halt in spending from these major brands poses a significant challenge for X’s advertising revenue moving forward.
Public Response and Political Impact
Elon Musk’s comments and the advertising lapses on X have not gone unnoticed in the public eye. Republican presidential candidate Chris Christie criticized Musk’s comment, describing it as part of an “outrageous type of hate.” In response, a super PAC supporting Christie pulled its advertising from X. The political impact and public response to Musk’s endorsement have contributed to the growing challenges faced by X.
X’s Response to Controversy
X’s CEO Linda Yaccarino addressed the company’s challenges in an internal meeting with employees. However, she did not mention Musk’s endorsement of the antisemitic post. Instead, Yaccarino attributed X’s problems to a report by Media Matters, a left-wing media watchdog group, which exposed ads on X next to racist and incendiary content. X subsequently sued Media Matters, claiming that the report manipulated algorithms and bypassed safeguards. X has defended its commitment to free speech and its refusal to be influenced by external criticisms.
Positive Advertising Examples and Donations
Despite the challenges and controversies, X has celebrated companies that continue to advertise on the platform. Elon Musk took the time to personally acknowledge the National Football League and express his love for the organization. In addition to highlighting positive advertising examples, X has also announced its intention to donate revenue from the war in Gaza to hospitals in Israel and the Red Cross/Crescent in Gaza. This donation includes revenue from ads purchased by charity groups, news organizations, and other groups related to the conflict.
In conclusion, X is currently facing a significant loss in advertising revenue due to major brands pausing or considering pausing their ads on the platform. The impact on the company’s fourth quarter, traditionally its strongest, is expected to be substantial. Hesitance to advertise on X, concerns about Elon Musk, and the endorsement of an antisemitic conspiracy theory have all contributed to the advertising lapses. X’s response to the controversy includes legal action and a firm commitment to free speech. Despite the challenges, X is also highlighting positive advertising examples and making donations to support healthcare efforts in the aftermath of the war in Gaza.
Source: https://www.nytimes.com/2023/11/24/business/x-elon-musk-advertisers.html
