X-Scandal: Brands Fleeing After Elon Musk’s Outburst!

(Reuters) – Social media company X faces the threat of more advertisers fleeing and no clear solution in sight, advertising experts said, after billionaire owner Elon Musk chided some of the biggest brands for abandoning the platform.

Walt Disney and Warner Bros. Discovery suspended advertising on X earlier this month after Musk endorsed an anti-Semitic message that falsely claimed members of the Jewish community were inciting hatred against white people.

After apologizing for his message while speaking at the New York Times DealBook event on Wednesday, Musk launched a tirade against advertisers for fleeing the platform, accusing brands of “extortion.”

He appeared to single out Walt Disney CEO Bob Iger, who spoke earlier at the event and said the association with X was “not positive for us.”

“Companies need to protect the brands they work for,” said Lou Paskalis, founder of marketing consultancy AJL Advisory and former head of global media at Bank of America. “This is not a gathering of advertisers in a secret clubhouse to support a program.”

In a memo to employees Thursday, seen by Reuters, X CEO Linda Yaccarino said Musk’s interview was “honest and in-depth” and encouraged staff to watch it. He reiterated that X’s mission is to be an open platform without censorship.

“Our principles have no price tag and will not be compromised – ever,” the memo says.

The Tesla chief also acknowledged that a prolonged boycott by advertisers could drive X, formerly Twitter, out of business, but suggested the public should blame the brands, not him, for a potential collapse.

However, Insider Intelligence analyst Jasmine Enberg said: “If anyone is going to kill X, it will be Elon Musk — not advertisers.”

“If X collapses, the autopsy would reveal a series of platform policy decisions, personnel cuts, tweets and hateful comments from Musk that have displaced X’s primary source of revenue,” Enberg said.

An executive at a major global ad-buying firm, who declined to be named, said only one major client continued to advertise on X.

“(Musk) seems hell-bent on destroying the platform,” the executive said.

X risks not only losing corporate advertisers but money from political candidates, a revenue stream that reopened after the platform lifted its ban on political ads. U.S. political ad spending is expected to hit a record $10.2 billion in 2024 — the year the presidential election is held, according to AdImpact, which tracks political ads.

Mike Nellis, CEO of Authentic, a digital marketing agency that works with Democratic candidates including US President Joe Biden, said he plans to talk to all of his clients about whether or not to spend on X.

“Telling the big advertisers and Bob Iger to go F could be the final nail in the coffin,” Nellis said.

X has come under fire for lax content moderation, especially from advertisers who don’t want their ads to appear next to inappropriate content.

Advertising spending on X in the United States from January to October this year fell 64% compared to the same period in 2022, according to media analytics company Guideline, which tracks advertising spending by major advertising agencies.

“We believe there is a risk that more companies will stop advertising on X, at least in the short term,” D.A. Davidson & Co analyst Tom Forte said.

“It’s fair to say that this makes the company’s subscription efforts more important and potentially means it may need more than half of its revenue from the merger,” he said.

According to research firm Data.ai, the number of monthly active users in the U.S. also fell by about 19 percent after Musk bought Twitter last year.

Data from Sensor Tower showed that Apple, IBM, Sony, Disney, Comcast, including NBC Universal, and Paramount accounted for a combined 7% of total US ad spending on X through October of this year.

At a dinner hosted by the New York Times after the DealBook Summit on Wednesday, guests, which included representatives of major brands, were “shocked” to see Musk take on advertisers, said one attendee, who declined to be named.

One sentiment seemed to be shared among brand representatives when discussing X: “It’s clear that (Musk) doesn’t want us there, and we don’t want to be there,” the attendee said.