Advertiser exodus expected to deeply impact X ad revenue, analysis indicates

Even before major brands like Apple, Disney, and IBM paused their ad spending on X in the wake of Elon Musk’s endorsement of an antisemitic post, the company formerly known as Twitter had seen its revenues severely impacted by brand safety concerns. According to an October forecast from Insider Intelligence, X ad’s business was on track for a 54.4% year-over-year decline in worldwide ad spending, from 2022 to 2023. With the additional advertiser pull-outs, that decline may be even more significant, analysts now believe.

X is facing a potential loss of sizable ad spend, as a number of advertisers have paused or stopped their ad campaigns on X after owner Elon Musk amplified antisemitic conspiracy theories on the platform. Among the brands who have since stopped advertising on X are Apple, Comcast/NBCU, Disney, Warner Bros., IBM, Paramount, Lionsgate, and the European Commission.

Though X has still proven itself as the hub for fast-breaking news — as this weekend’s OpenAI drama proved — the nature of its business is still dependent on advertising, which makes up the majority of its revenue. As Twitter, ads accounted for roughly 90% of company revenue, with API licensing fees and subscriptions also contributing to the company’s bottom line. But Musk’s plan to beef up X’s subscription plan with a new set of features, including paid verification, has not been proven successful enough to weather a large advertiser departure in the long run. That doesn’t necessarily mean X will shut down — 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 advertiser departures could now prompt a further exodus.

“The damage to X’s ad business will be severe,” she predicts. “A big-name advertiser exodus will inspire other advertisers to follow suit, and there is already likely a long tail of less vocal advertisers that have pulled spending.”

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

“Advertisers are accustomed to dealing with brand safety concerns on social media, particularly during periods of political and social tension or war. But they’re not accustomed to a platform’s owner amplifying misinformation and hate speech, and emboldening conspiracy theorists,” Enberg notes. “The impact of Musk’s words poses a major societal danger. Twitter’s influence has always been larger than its user base and ad revenues, and while the platform’s cultural relevance has declined, Musk and X are still very much a major part of public conversation,” she adds.

The complaints against Musk arrive alongside a report from Media Matters, which showed how ads were appearing alongside posts praising Nazi ideology. An executive at X, Joe Benarroch, pushed back at Media Matters’ reporting, however.

Benarroch, who joined X from NBCU shortly after CEO Linda Yaccariono has, at times, acted as a company spokesperson as Musk’s earlier layoffs wiped out the company’s comms department. He claimed 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 with the median. In other words, he’s saying that a typical user wouldn’t have the same experience with regard to ad placement.

Still, X was on a downward path even before these recent debacles. Ahead of this, X’s ad revenues were already forecast to decline by 54.4% from 2022 to 2023 — a sizable drop for the platform that Musk has now run for roughly one year so far. And Musk himself said in September that U.S. ad revenues were then down by 60%, citing pressure from the Anti-Defamation League which accused the owner of antisemitism. (Musk, in turn, threatened to sue the ADL).

Insider Intelligence’s figures are in that same ballpark — its forecast predicts that X’s U.S. advertising revenues were expected to be down by nearly 55% year-over-year, and 54.4% worldwide. And this, we should note, was calculated before these latest advertiser departures.

The analysts also estimated that X’s monthly active users will have dropped by 4.1% to 348.6 million by year-end 2024, down from 363.7 million in 2023, and a high of 373.6 million in 2022. (Musk took over Twitter in late October 2022.) U.S. users are forecast to decline as well, the firm predicts — down to 51.6 million by 2024, a decline of 8.1% from 56.1 million in 2023, and a high of 58.9 million in 2022.

Enberg additionally suggests that Yaccarino’s efforts to assure advertisers of X’s brand safety efforts will not work, given she’s being undermined by Elon Musk himself. Forbes recently reported that top advertising executives have been pressuring Yaccarino to resign, suggesting her own reputation is now at risk as a result of Musk’s actions. So far, those requests have fallen on deaf ears, it seems, as Yaccarino has been posting on X in support of free speech and the company’s vision.

“What we’re doing at X matters and has everyone’s attention. I believe deeply in our vision, our team, and our community,” she wrote in a post on X on Monday morning. “I’m also deeply committed to the truth and there is no other team on earth working as hard as the teams at X. When you’re this consequential, there will be detractors and fabricated distractions, but we’re unwavering in our mission,” the post read.

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