Advertiser backlash may pose mortal threat to Elon Musk's X

Bobby Allyn

December 07, 2023 / 1:47 pm

caption: Elon Musk, who owns X, formerly known as Twitter, is facing an advertiser backlash on the platform, which is reliant on advertising revenue.

Even longtime observers of the unpredictable Elon Musk were stunned by his remarks last week onstage at the New York Times DealBook Summit with journalist Andrew Ross Sorkin.

In response to an advertising boycott that has been growing, Musk told companies: "Don't advertise" — before saying corporations were attempting to "blackmail" him with money. He used the F-word in cursing out companies that have decided to step back from the platform.

Owners of embattled companies do not usually attack their customers. But Musk is different.

"That was kind of the final nail in the coffin. If he's telling you what he wants you to do, believe him," said Tom Hespos, who runs Abydos, an advertising consulting firm.

Many advertisers have been taking Musk at his word.

Since his hostile takeover of Twitter last year, Musk has cleared out more than two-thirds of the staff, including teams dedicating to policing the platform for hate speech and harassment.

Musk reinstated previously banned users and made "verified" blue check marks available for purchase, wreaking havoc across the site as impersonators and bad actors looking to spread false posts jumped on the opportunity to have a blue check mark on their profile. The platform's algorithm supercharges posts from paid users.

Musk himself created yet another controversy by endorsing an antisemitic post on X that claimed Jewish communities push hatred of white people. Musk said that this was the "actual truth."

"Advertisers don't want to answer questions about why are you on a platform that seems like it's a safe space for antisemitism, for hate speech," Hespos said.

Many major corporations like Walmart, Apple, Disney and IBM have stopped advertising on X.

That Musk post? He apologized for it, saying on the DealBook stage that it was like handing a "loaded gun" to antisemites and his enemies. Still, the damage was done, said Lou Paskalis, a former advertising executive who now helps blue-chip companies with marketing plans.

"If your CEO is on a different sheet of music than the rest of company, it really requires a lot of suspension of disbelief that those views aren't imbued in the company," Paskalis said.

In response to Musk's recent outbursts, Paskalis said, he has fielded questions like these from top executives worried about placing ads on X: "Could we precipitate a boycott of our products? If our products get boycotted, will the board call my CEO to task?"

But it is hard to know how much ad money has disappeared. That's because Musk took the company private, meaning its financials are no longer publicly available.

But when Twitter was a public company, about 90% of its annual revenue came from advertising. Staffers at the company now say that figure is not far different today.

A New York Times report, citing internal X records, said up to $75 million could be lost because of the advertiser exodus. Before Musk took over the social media platform, it was a $5 billion-a-year company. It is unclear how much revenue X is now generating in the wake of Musk's radical shake-ups.

On the DealBook stage, Musk said the advertiser revolt could be lethal for the company.

"Actually what this advertising boycott is gonna do is it's gonna kill the company," Musk said. "And the whole world will know that those advertisers killed the company."

But what does Musk mean by kill? Bankruptcy? Will it go totally under? Will he sell it? Is he exaggerating?

As is always the case with Musk, it is vexing trying to figure out the answer to the most basic questions. His ultimate intent eludes the most seasoned observers.

Paskalis said there is no doubt that with reusable rockets and electric vehicles, Musk has been a business genius. But running a social media site is not something that can be solved mathematically.

"And I think that does not comport with his superpower. I'm hoping that causes him to ultimately sell the platform to someone who would be a more capable steward," he said.

Of course, as the richest person in the world, Musk can bail out X for a very long time if he wants to. But at what point might he just want to cut his losses?

Some Musk observers say probably never. He's too determined to prove something to his haters.

One thing is for sure: The job of Linda Yaccarino is not getting easier. She is the former advertising executive who was tapped by Musk to be CEO of X. Her chief task is bringing fleeing advertisers back to the platform.

Yaccarino's friends and associates say she is unlikely to bail on X regardless of how erratic her boss is, since she, like Musk, is known for being tenacious.

"I have texted her in the past about maybe it's time to go. And I've done it on a couple of occasions face-to-face," Paskalis said of her leadership role at X. "And I'm not going to have that conversation anymore, because it has become clear she isn't going anywhere."