In a potential blow to Elon Musk’s social media venture X, industry analysts are predicting increased advertiser departures from X following the billionaire’s controversial remarks targeting major players in the media sector. The verbal assault took place during a New York Times DealBook event on Thursday, with analysts anticipating a ripple effect that could see more companies distancing themselves from the platform.
Walt Disney (DIS.N) and Warner Bros. Discovery (WBD.O) had previously suspended their advertising on X in response to Musk’s endorsement of an antisemitic post. The contentious post falsely claimed that members of the Jewish community were fueling animosity against white individuals. Musk issued an apology for his initial post during the event on Wednesday. However, this was swiftly followed by a profanity-laden diatribe against advertisers who had chosen to abandon the platform.
Acknowledging the potential repercussions, Musk conceded that a prolonged advertiser departures from X could spell financial ruin for the social media company, previously known as Twitter. Despite this acknowledgment, he contended that the blame for any potential collapse should be placed on the brands themselves rather than on him. The company has been under scrutiny for its perceived lack of stringent content moderation, particularly from advertisers concerned about their ads appearing alongside inappropriate content.
D.A. Davidson & Co analyst Tom Forte expressed concerns over the situation, stating, “We believe there is a risk that more companies will stop advertising on X; at least on a short-term basis.” Forte further emphasized the heightened importance of the company’s subscription efforts, suggesting that it may be necessary for over half of its revenue to be derived from subscriptions.
Recent reports indicate a significant decline in monthly U.S. ad revenue at X, with a year-over-year decrease of at least 55% each month since Musk’s acquisition of the company in October 2022, as reported by Reuters last month. The Tesla (TSLA.O) chief’s assessment of Twitter’s value has also come into question, with Musk asserting that the platform is worth considerably less than the $44 billion he paid for it.
Russ Mould, investment director at AJ Bell, expressed skepticism about the rapid recovery of Twitter’s value, stating, “It is hard to argue that will change quickly if advertisers take deep offense to what he said yesterday.”
The controversy surrounding Musk’s comments has underscored the challenges facing X as it grapples with maintaining advertiser relationships while navigating the consequences of its CEO’s provocative statements. The potential fallout from this incident may have far-reaching implications for the platform’s financial stability and future prospects triggering further advertiser departures from X.
Source: Reuters
