Is this the beginning of the end for big ad spend on Musk’s X?

“Go f*** yourself.” Advertisers everywhere will clearly remember Musk’s brusque, profanity-laced response to the news that advertisers are leaving X, marking the beginning of a period of contention between the corporate magnate and the advertising community. The stand-off has left X looking at a potential loss of $75mn in ad revenue as major brands reassess their marketing strategies and seek alternative platforms that align more closely with their brand values and target audiences. This shift not only reflects the immediate financial impact of Musk's stark messaging but also underscores a deeper, industry-wide reckoning with platform policies, user engagement, and the broader implications of advertising decisions. 

We take a look at where ad spend is being redirected, and what this could mean for the future of X and other social platforms. 

Preparing for an X-odus

With X’s platform moderation descending in the hierarchy of priorities, compounded by Musk's recent tirade, advertisers are charting a course toward seemingly calmer waters. The approximate 16% decline in monthly active users since the acquisition signals not just turbulence within the platform, but perhaps more significantly, it hints at an underlying, broader movement towards platforms that speak in the languages of images and videos.

Upwards of 60% of advertisers are navigating towards the promised lands of Instagram and YouTube for their future marketing endeavors. This chasm between the social media titans is mirrored in the cost-per-click rates for X, which is much lower when compared to the steeper tariffs of Facebook, Instagram, YouTube, or LinkedIn. Even though CPC comes at a cheaper cost, X’s growth in ad engagement appears to be trailing behind in the competitive digital race.

And with recent news that X’s worldwide ad sales will fall by more than half this year, where exactly is ad spend heading?

Expanding Ad Horizons

The industry harbors a sense of nostalgia for what X, formerly Twitter, once embodied, as other platforms try to fill in the gap.

As funding for advertising on X somewhat wanes, brands are reallocating their resources to what is deemed to be more dependable outlets like Meta's Facebook and Instagram, which are offering comparable or even superior paid reach. For TikTok, the proof is in the numbers - the platform has 1.1 billion users, and has been downloaded over 220 million times in the United States alone. This popularity has resulted in TikTok ad revenues topping $9.9bn, an increase of 155% over the previous year.

For Meta, data from SensorTower points to a trend of major brands amplifying their investment in Meta's Instagram. Disney has augmented its expenditure by 40% in the fortnight leading up to early December, while Comcast has elevated its spend by 6% during this identical timeframe. Further analysis by SensorTower reveals that, of the top 100 advertisers active on the platform at the time of its acquisition last October, a majority have ceased their advertising spend on the platform entirely. In fact, data showed 51 of the top 100 U.S. advertisers on X from October last year, when Musk bought the platform, have ceased ad spending on it as of November 2023. Dubbed Meta’s ‘Year of Efficiency’, digital ad sales on Meta reached $38.7bn for the quarter - an increase of 24% from the same period in 2023.

Interestingly, X’s mishaps have resulted in LinkedIn seeing unprecedented levels of ad spend, coupled by enhanced targeting for its billion users. As per Insider Intelligence’s recent findings, US B2B display ad spending on LinkedIn will grow to $4.5bn by 2024. This year, LinkedIn will capture nearly 25% of all B2B digital ad dollars spent in the US. What was once only seen as a platform for job hunters, and slightly unhinged self-promotional material, is now seen as an increasingly viable platform for advertisers. Executives in marketing and advertising relayed to the Financial Times that LinkedIn ad costs are climbing, driven by auction-based demand - some saw a 30% hike in a year. 

Does X Still Mark the Spot? 

In assessing the current situation of X, it is not all doom and gloom - X is still the fourth most visited website globally, retaining a substantial user base and influence. Still hanging on to the coat-tails of the microblogging success pioneered by Twitter, no other platform has been able to replicate this effectively. This is especially evident when considering the recent attempts by competitors, such as Threads, to capture a similar audience, yet failing to achieve the same level of engagement or cultural impact.

The Super Bowl, an event watched by millions globally, provides a pertinent example of X's reach, which stills retains the title of king of the second screen viewing. Despite the changes and challenges, X continues to be a pivotal platform for real-time discussions, live-tweeting events, and engaging with a wide audience during the event. The platform's ability to convene a vast, engaged audience during the Super Bowl underscores its influence in public discourse.

As each decision unfolds, the platform’s effectiveness and relevancy is seemingly shadowed by Musk's penchant for controversy over clarity, and his prioritisation of persona over financial stability. So, is this the beginning of the end for significant ad spend on the platform? Perhaps only time, and Musk’s next PR disaster, will tell.