In October 2022, Elon Musk made headlines with his tumultuous $44 billion acquisition of Twitter — far exceeding the platform’s valuation at the time.
Nearly two years later, the social media firm, now rebranded as X, is embroiled in more controversy. It has reportedly experienced a 24% YOY decline in advertiser support in the first half of 2024.
What was once a bustling marketplace for brands is quickly becoming a vacuum, with companies withdrawing their advertising dollars, leaving X struggling to maintain its relevance and profitability.
Elon Musk’s acquisition of Twitter was far from a smooth transition. After initially agreeing to purchase the platform, Musk tried to back out of the deal, citing concerns over the prevalence of fake accounts.
However, the courts forced him to proceed with the purchase. Under Musk’s leadership, X has undergone significant changes — one of the most consequential being the platform’s approach to content moderation.
Musk’s decision to re-platform previously banned users, such as former US President Donald Trump and UK far-right activist Tommy Robinson, has raised concerns among advertisers about the safety and appropriateness of the content their ads might appear alongside.
Additionally, the decision to ban the word “cisgender” as hate speech has further fuelled the controversy, alienating certain user groups and advertisers alike.
The changes in X’s content moderation policies have profoundly impacted the platform’s ad revenue. Advertisers are increasingly wary of their brands appearing next to hate speech, offensive content, or misinformation.
Brenda Imeson, director of strategy at digital advertising firm Brave Bison, explains, "Clients are cautious about exposing their most valuable asset — their brand — to unnecessary risks."
"Musk's well-known scepticism towards the advertising sector, coupled with his penchant for sharing controversial content, left many marketers uneasy about the future of Twitter," she says.
According to a survey conducted by the Kantar Group, many advertisers cite a lack of innovation and trustworthiness as primary reasons for their departure.
The survey found that X's trust score has dropped from 28% in 2021 to just 16% in 2023.
This decline in trust reflects a net 14% of marketers planning to decrease their investment in X in 2024.
In contrast, platforms like TikTok and YouTube continue to attract advertising dollars. TikTok sees a net 77% of marketers planning to increase their budget for the platform in the coming year.
Karim Salama, director at e-innovate, highlights that the platform's instability under Musk's leadership has driven advertisers towards more reliable platforms like TikTok and Instagram.
"There's been a noticeable drop in user interaction, as well as controversial policy changes," Salama explains. "This unstable atmosphere for ROI drives advertisers towards platforms where they can expect consistent results."
X is predominantly used for news consumption, with 60.6% of users reporting utilising the platform to stay informed. However, the influx of "fake news" and misinformation on the app has likely contributed to its decline in popularity.
Moreover, X's user demographics present another challenge. The platform's audience is 61.2% male. In contrast, platforms like Instagram and LinkedIn have a more balanced gender distribution, which may make them more attractive to advertisers looking to reach a diverse audience.
Additionally, X's younger user base, with 58.38% of users between 18 and 34, may have a higher propensity for platforms like TikTok and Instagram, which, according to Kantar's survey, are perceived as more innovative and trustworthy.
Salama explains, "TikTok and Instagram are far more appealing — younger audiences thrive on platforms that promote genuine storytelling and community connections. This just doesn't exist on Twitter.
"Twitter's text-driven nature is outdated for today's consumer — advertisers will instead redirect their campaigns to TikTok to take advantage of its organic reach potential."
GARM, a voluntary initiative created in response to high-profile cases of harmful content next to brand ads, was crucial in ensuring safe and responsible ad placements.
However, GARM recently found itself in a legal battle with X after advising businesses to reconsider advertising on the platform due to concerns over brand safety.
X responded by suing GARM, accusing the organisation of colluding with businesses "to collectively withhold billions of dollars in advertising from Twitter".
GARM has over 100 members. Four of which — CVS, Unilever, Mars and the Danish energy company Ørsted — were named defendants in the suit filed in federal court in Texas.
In a statement on its website, GARM announced, "Recent allegations that unfortunately misconstrue its purpose and activities have caused a distraction and significantly drained its resources and finances. WFA [World Federation of Advertisers], therefore, is making the difficult decision to discontinue GARM activities."
As Sarah Aird-Mash, CMO of Adludio, notes, "GARM used the ad collective might to rally against questionable activity, and its absence raises concerns about the future of brand safety in digital advertising."
Peter Ibarra, head of media and AdTech solutions at Amperity, adds that the dissolution of GARM marks a turning point for advertisers. "The proliferation of advertising channels makes it difficult for advertisers to know where to make the next investment," he says.
"The recent lawsuit by X leading to GARM's dissolution signals a new era where unwavering platform allegiance is no longer a reality."
This isn't the first such legal battle for X. Last year, X sued the Center for Countering Digital Hate, another non-profit, when it wrote about hate speech on the platform and blamed it for driving away advertisers.
The case was thrown out by a federal judge in March, claiming it was an attempt to punish CCDH for protected speech.
In November last year, X also began litigation against Media Matters, a watchdog group that highlighted antisemitic and pro-Nazi content appearing next to ads on X. The case is set to go to trial next April.
Our US advertising revenue is still down 60%, primarily due to pressure on advertisers by @ADL (that’s what advertisers tell us), so they almost succeeded in killing X/Twitter!
— Elon Musk (@elonmusk) September 4, 2023
Gonca Bubani, global thought leadership director at Kantar, emphasised the broader implications of X's decline, noting that "marketer sentiment around X has been continuously declining."
Bubani pointed out that while X's decline began before Musk's takeover, the current social and political climate has exacerbated the platform's troubles. "Musk's politicisation of the platform is adding fuel to the fire, which will have an impact.
"What's clear is that the decline in spend isn't only coming from the direction institutions like GARM give the industry."
Advertisers are not just concerned with brand safety; they are also wary of the platform's declining performance.
Mark Bellamy, strategy director at NewGen, emphasises that the reduced power of user acquisition on X is not solely due to Musk's controversial remarks. "The increasing power to hold attention through short video on TikTok, Instagram, and YouTube has also pushed brands to look elsewhere for ROI as much as peace of mind," Bellamy explains.
"The love for a product or a brand's personality from existing fans hasn't waned on X, even if the ability to find a new audience has due to the reduced number of users going there for discovery purposes. But this reduced power of acquisition on X is a pre-Elon trend."
As advertisers navigate this changing landscape, many turn to data-driven strategies to optimise their campaigns in real time.
Peter Ibarra underscores the importance of first-party data and advanced analytics in this context: "By using the power of first-party data and advanced analytics, brands are not just adapting to change — they're proactively shaping their advertising future.
"This data-driven agility allows for rapid pivots across media channels, ensuring optimal returns on ad spend by fostering deeper, more personalised customer connections."
Interestingly, despite the exodus of advertisers, user engagement on X has remained relatively stable, with users reportedly spending an average of 30.9 minutes daily on the platform.
However, this increased engagement has yet to translate into advertiser confidence.
Brenda Imeson points out that "the perception of the platform as a high-risk environment for brands has driven advertisers away, highlighting a critical disconnect between user engagement and advertiser confidence."
"With GARM's shutdown, advertisers are once again facing uncertainty regarding the safety of their ad placements," she says.
"In the short term, this uncertainty is likely to lead advertisers to stick with media partners and platforms where they have built trust over the past few years. The marketing community views this shift not as a "boycott," as X might perceive it, but rather as the exercise of "freedom of choice."
While the platform still enjoys user engagement, the disconnect between users and advertisers suggests that X may struggle to regain its position as a leading social media platform for advertisers.
Ironically, advertisers leaving X could see consumer patterns change in the other direction — after all, most social media users are deterred by a greater number of ads.
We reached out to GARM for comment, but they have not yet responded at the time of publication.
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