While Elon Musk and X CEO Linda Yaccarino have repeatedly lauded the fact that their X project is “not boring”, I’m pretty sure that the events of this week would have them both relieved to see a period of relative boredom heading into the holiday break.
Though that, of course, seems unlikely.
This week, X has been hit with a new raft of challenges, mostly stemming from Musk’s own statements and public stances on various issues.
To recap, throughout the week:
- A new third-party analysis report suggested that X is not doing enough to combat misinformation around the Israel-Hamas war, which is essentially supported by X’s own enforcement numbers
- Based on this, and other reports, the European Commission announced that it would stop advertising on X, due to “widespread concerns relating to the spread of disinformation”
- The following day, IBM also announced that it would halt all advertising on X as a result of a new report from Media Matters which showed that X is placing paid promotions alongside pro-Nazi material in-stream
- On that same day, Musk amplified and supported an anti-Semitic talking point on X, which has been linked to various attacks on Jewish people over the years (SMT will not be repeating the details of this)
- As a result of Musk’s post, several big-name advertisers have now announced that they’ll also be pausing their X ad campaigns, including Apple, Lionsgate, Disney, and more. The list of advertisers joining this new boycott is growing by the hour
- A federal judge also rejected an attempt by X to overturn an FTC fine of $150 million (stemming from actions under previous Twitter management)
- On another front, an industry watchdog has called on the FTC to examine X’s new ad formats, some of which are not clear enough in their disclosure. That could lead to a new investigation into X’s ad practices
So, yeah, it hasn’t been a great 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 manage key tasks. Which, based on a growing number of investigations, is clearly not capable of handling such.
Though that, of course, is not even the biggest 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 will say what he wants in the app, even if it means losing money as a result.
And it does seem that he is about to find out how expensive his commentary can be. As a reminder, X’s ad revenue is already down at least 50% on last year, so any loss of a major brand partner will be significant, in terms of the ongoing viability of the app.
Because even though 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 is still riding the line on profitability.
In a recent interview, Yaccarino said that X could be close to 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, many of them are leaving once again. And with Apple making a big statement by announcing its decision to halt X ads, it’s now expected that many more big names will follow suit.
And all the while, Meta’s alternative real-time app Threads continues to grow, and become a bigger place for news discussion, especially among journalists, a group that Musk continues to deride, actively dissuading them from staying active on his platform.
Which could also be another element that continues to hurt X’s recovery efforts, with Musk also taking the opportunity to attack IBM for its decision to halt X ads, among his ongoing attacks on “legacy media”. Which is a narrative that Musk continues to drive, that no one really has a problem 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 simply not true, is unfounded, and not 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 that have driven them away.
It’s not a media narrative, nor a conspiracy to quell the “real truth”.
The only person to blame for X’s troubles is Musk himself.
Which is going to cost him money, which, as noted, Musk has said that he’s fine with. But with his advertiser pool shrinking, that could quickly become an existential threat for the app, if Yaccarino and Co.’s damage control efforts are not able to stem the rising tide.
And it does feel like a tide this time, it feels like many are viewing this as 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 pull out of his projects.
Will it be a major turning point, for Musk and/or X? Will it fuel the rise of Threads as a genuine X rival?
In some ways, it already has, while Musk, in his own, stubborn way, seems to have begrudgingly acknowledged that his comments may have caused offense.
He hasn’t apologized, nor taken a backwards step. But that next step is likely the only way out of this mess at this stage.
Can Musk actually do that? Will his ego allow him to step forward, admit that he was wrong, and take steps to rectify the situation?
And if he does, will that be enough to bring ad dollars back?
Heading into the biggest ad spending period of the year, Musk’s statements are horrendous, from all perspectives.
Could they be the beginning of the end of X?