Elon Musk’s X is especially vulnerable to an ad boycott

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For someone who despises the advertising industry, Elon Musk has a talent for viral slogans. HAS New York Times On November 29, the world's richest man was asked what he thought about companies removing ads from X, the social network he bought last year when it was known as Twitter name. “If anyone tries to blackmail me,” he replied, “fuck you.” THE “GFY“The approach,” as he called it, can come naturally to billionaires. But that's bold for a company that last year made about 90% of its revenue from advertising. Those that have removed X's ads include Apple and Disney, whose presence Mr. Musk previously cited as proof that X was a safe space for brands.

Advertisers are concerned about unsavory content on the platform. Since Mr. Musk fired 80% of X's staff, including many moderators, more bile seems to be leaking through the filters. Last month, Media Matters for America, a watchdog organization, reported that ads for brands such as IBM had appeared alongside messages praising Adolf Hitler (X disputes this and is suing Media Matters).

Social media is freer than mainstream media to tell advertisers to get lost. While a typical TV In the United States, the social network derives most of its advertising revenue from fewer than 100 large clients, while social networks can have millions of smaller ones. A year ago, the largest, Facebook, made 45% of its national sales from its 100 largest advertisers, estimates Sensor Tower, a research firm; its boycott in 2020 by more than 600 companies, including giants like Unilever and Starbucks, had little effect on sales. But X lacks Facebook's sophisticated ad targeting apparatus and relies on campaigns from big brands. In October 2022, when Mr. Musk bought Twitter, his top 100 clients accounted for 70% of U.S. advertising sales.

image: The Economist

Half of them have since left X, says Sensor Tower. On December 1, Walmart announced its withdrawal due to the poor results of its advertisements on X. The impact was severe. In September, Mr. Musk said that X's U.S. advertising business was down 60%. Advertisers in other regions may be less bothered by Mr. Musk's culture wars. But X particularly depends on America. While Meta, Facebook's parent company, makes most of its money overseas, 56% of Twitter's revenue came from the United States before Mr. Musk bought it. Even before GFYInsider Intelligence, another research firm, expects X's global ad sales to fall by more than half this year (see chart).

Mr. Musk's fans insist on being rude to kissing advertisers and “woke” brands delight ordinary X users. Meta. Still, Sensor Tower reports that App

Some observers attribute this to a purge of bots and fake users. Still, X must monetize its users in new ways to offset declining ad dollars. One idea is X Premium, which offers additional features and fewer ads for between $3 and $16 per month. So far, there appear to be few takers: Sensor Tower estimates that . Mr. Musk talked about turning X into a “do-it-all app,” handling payments, calls and more. But even optimists admit it will take years.

In the meantime, the objective is to replace the large advertisers who are leaving with an army of small ones. X would work on its advertising technology for small businesses, taking an interest in a long line of Facebook type customers. There's no time to lose. Further declines in advertising sales could require a bailout from investors or Mr. Musk himself. X's employees have their work cut out to attract advertisers faster than their boss repels them.

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