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The backstory: Last year, Elon Musk made headlines by buying out Twitter for US$44 billion and rebranding it as X. After the takeover, he started shaking things up, from limiting blue-check verification to X Premium subscribers to tweaking post limits and ditching the block feature. Notably, content moderation rules were also relaxed, resulting in a surge of offensive posts that didn't sit well with advertisers. Despite Twitter's ad-driven history, Musk acknowledged a big hit in the platform’s revenue – down around 50% in March and a 60% drop in the US by September.
More recently: In November, X faced a challenge when major advertisers, like Warner Bros. Discovery, Sony, IBM, Apple, Lionsgate, Disney, Comcast and Paramount Global, all paused ad spending on the platform. This came after some drama over Musk seeming to support an antisemitic post on the platform, as well as a report surfacing that some corporate posts had been shown next to offensive content. Musk apologized afterward, but at a recent conference, he gave boycotting advertisers a piece of his mind, telling them to “go f**k” themselves and calling the boycott “blackmail.” But he also pointed out that the drop in ad revenue could “kill the company.”
The development: Recent reports have surfaced from insiders saying X has seen a major hit in its ad revenue, potentially landing at around US$2.5 billion – a drop from previous years. To put it in perspective, throughout the first three quarters of the year, X brought in just over US$600 million in ad revenue per quarter, marking a clear decrease from over US$1 billion per quarter in 2022. Ad sales are the platform’s main income source, making up 70-75% of X's total revenue, according to two people familiar with the matter. Crunching the numbers, the estimated sales for 2023 are hovering around US$3.4 billion, factoring in subscriptions and data licensing deals. That compares to the company’s goal set in 2021 when it was led by then-CEO Jack Dorsey before Musk bought it out – at that time, execs said they aimed to reach US$7.5 billion in revenue by the end of 2023.
“This presents an incomplete view of our entire business, as the sources you’re relying on for information are not providing accurate and comprehensive details,” said Joe Benarroch, head of business operations for X.
“I don’t want them to advertise,” said Elon Musk at the New York Times DealBook Summit in New York last month. “If someone is going to blackmail me with advertising or money go f**k yourself. Go. F**k. Yourself,” he said. “Is that clear? Hey Bob, if you’re in the audience, that’s how I feel” he added, referring to Disney CEO Bob Iger, who spoke earlier at the summit on Wednesday.
In a statement, IBM said it “has zero tolerance for hate speech and discrimination, and we have immediately suspended all advertising on X while we investigate this entirely unacceptable situation.”