Advertiser exodus is expected to deeply impact X ad revenue, analysis shows

Even before big brands like Apple, Disney, and IBM stopped their ad spending on X after Elon Musk endorsed an antisemitic post, the company formerly known as Twitter saw its revenues which has been severely affected by brand safety concerns. According to an October forecast from Insider Intelligence, the X ad business is on track for a 54.4% year-over-year decline in global ad spending, from 2022 to 2023. With the more advertiser pull-outs, the more significant that decline becomes. , analysts now believe.

X faces a potential loss of large ad spend, as several advertisers have stopped or stopped their ad campaigns on X after owner Elon Musk raised of antisemitic conspiracy theories on the platform. Among the brands that have since stopped advertising on X are Apple, Comcast/NBCU, Disney, Warner Bros., IBM, Paramount, Lionsgate, and the European Commission.

Although X has proven itself as the hub for the rapid dissemination of news – as the OpenAI drama over the weekend proved – the nature of its business is still dependent on advertising, which constitutes the majority of profit from it. As with Twitter, ads account for roughly 90% of the company’s revenue, with API licensing fees and subscriptions also contributing to the company’s bottom line. But Musk’s plan to improve the X subscription plan with a new set of features, including paid verification, hasn’t proven successful enough to warrant a major departure. to the advertiser in the long run. That doesn’t mean X will close — it’s owned and operated by a billionaire, after all — it just means it will need new sources of funding at some point.

warns Insider Intelligence analyst Jasmine Enberg, the latest departure from the advertiser may prompt a further exodus.

“The damage to X’s ad business will be severe,” he predicted. “A big-name advertiser exodus will encourage other advertisers to follow suit, and there’s likely to be a long tail of less-vocal advertisers that drag spending.”

While brands generally understand the risk of running ads against user-generated content, they often don’t find themselves in a situation like this, he also points out.

“Advertisers are used to dealing with brand safety concerns on social media, especially in times of political and social tension or war. But they’re not used to being the owner of a platform that fosters of misinformation and hate speech, and encourages conspiracy theorists,” Enberg said. “The impact of Musk’s words poses a great danger to society. Twitter’s influence is always greater than its user base of it and ad revenues, and while the platform’s cultural relevance has waned, Musk and X are still an important part of the public conversation,” he added.

The complaints against Musk come with a report from the Media Factors, which shows how ads appear alongside posts praising Nazi ideology. However, an X executive, Joe Benarroch, pushed the Media Matters report.

Benarroch, who joined X from NBCU shortly after CEO Linda Yaccariono, has, at times, acted as the company’s spokesperson as Musk’s previous layoffs gutted the company’s communications department. He admitted in a post on X that Media Matters used 3 accounts and then constantly refreshed the timeline of posts to see 13x the number of ads served, compared to the median. In other words, he says that a typical user will not have the same experience regarding ad placement.

However, X was on a downward path even before these recent upheavals. On top of this, X’s ad revenues are already predicted to decline by 54.4% from 2022 to 2023 – a huge drop for the platform that Musk has been running for almost a year now. and Musk himself said in September that US ad revenues fell 60%, due to pressure from the Anti-Defamation League which accused the owner of antisemitism. (Musk, in turn, threatened to sue the ADL).

Insider Intelligence’s numbers are in the same ballpark – its forecast predicts that US advertising revenue on X is expected to decline by around 55% year-over-year, and 54.4% globally. And this, we must note, was calculated before these latest departure announcements.

Analysts also estimate that X’s monthly active users will drop 4.1% to 348.6 million by the end of 2024, from 363.7 million in 2023, and a high of 373.6 million in 2022. (Musk takes over Twitter in late October 2022. ) US users are estimated to decrease as well, the company predicts – to 51.6 million in 2024, a decrease of 8.1% from 56.1 million in 2023, and a high of 58.9 million in 2022.

Enberg also suggested that Yaccarino’s efforts to assure advertisers of X’s brand safety efforts will not work, as he has been undermined by Elon Musk himself. Forbes recently reported that top advertising executives pressured Yaccarino to resign, suggesting that his own reputation is now at risk because of Musk’s actions. So far, those pleas have fallen on deaf ears, it seems, as Yaccarino posted X in support of free speech and the company’s vision.

“What we do at X is important and has everyone’s attention. I believe deeply in our vision, our team, and our community,” he wrote in an X post on Monday morning. committed to the truth and there is no other team on earth that works as hard as the X teams. If you are like this result, there will be detractors and artificial distractions, but we will not waver in our mission,” the post read. .

Insider Intelligence has not yet calculated the impact of the recent advertiser departure in its forecast, but said it will do so in the next update.

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