‘That bird is dead’ – how a year of Elon Musk tanked Twitter’s ad business

Mapping X’s Muskian transformation

Musk has overseen a slew of changes to the platform that have dramatically impacted its relationship with users, advertisers and news organizations. Notable among them include an overhaul of the site’s verification model that enables any user to buy a once-coveted blue checkmark but makes it more difficult to authenticate real users and combat spam. Musk axed longtime employees en masse and rolled back the site’s content moderation policies – a decision borne of his self-professed “free speech absolutism” and goal of transitioning to AI-driven moderation.

He welcomed divisive voices back onto the platform (including Donald Trump and, briefly, Ye) and watched as hate speech and misinformation increased. (Slurs against Black Americans more than doubled, while antisemitic posts referring to Jews or Judaism jumped by 61% following Musk’s takeover, per research from the Center for Countering Digital Hate, the Anti-Defamation League and other activist organizations).

Then, of course there was the rebrand. The infamous rebrand. Stripping the platform of its longstanding name and iconic bird logo, experts say, resulted in a devastating loss to brand equity. As Becci Salmon, a design director at IPG-owned ad agency FCB London, told The Drum at the time: “Twitter, tweets, tweeting – it’s all part of the vernacular, a familiarity that’s been built up over 17 years. [Musk is] ripping down a brand that’s been a cornerstone of social media … this is something only a billionaire on an ego trip would do.”

More recently, Musk has been behind a handful of functional changes that have upset users. He stopped headlines from auto-populating on news links in favor of a “cleaner” UX, which led to confusion, as links now appear similar to photos posted to the site and more easily enable the spread of misinformation. It served as another nail in the coffin for news organizations and journalists on the platform, who’ve been ostracized by Musk – and in some cases, even temporarily banned from the platform.

Earlier this week, Musk announced that two new subscription tiers would come to X, incentivizing users to pay a fee to bypass ads and tap into premium features. Then, on Thursday, users were greeted with a notification alerting them that audio and video calling capabilities have come to the app.

Many of the changes have been made in service of Musk’s larger vision: to create a so-called ‘everything app’ that rivals China’s WeChat, which centralizes features like messaging and mobile payment processing in one place. However, the tumult has ostracized rather than attracted many.

The social app has lost about 13% of its daily users, according to Apptopia data from October 2022 through September 2023. Its workforce has shrunk to less than a fourth of its former size.

Perhaps most critically, the company’s primary revenue driver, advertising spend, has slumped drastically. With a lack of focus on content moderation and surges in misinformation, top spenders like Coca-Cola, Unilever, Ford, General Motors and Wells Fargo have pulled all advertising dollars from the platform. Monthly US ad revenue at X has dropped around 55% year over year during every month since the acquisition, according to new data published in Reuters.

Marketing and media consultancy Ebiquity, which, according to research firm Comscore works with 70 of the 100 biggest spenders in advertising, told Insider this month that just two of its clients bought media on the divisive app last month – down from 31 clients in September 2023.

The data appears to contradict claims that both Musk and chief exec Linda Yaccarino – a longtime ad industry exec who many see as a mere figurehead for Musk’s decision-making – have made in recent weeks. Yaccarino said in an interview at Vox Media’s Code conference last month that 90% of X’s top 100 advertisers have returned to the platform “in the last 12 weeks alone” – a figure that stands at odds with third-party data on the matter. She claimed that AT&T, Visa and Nissan are among the brands that have resumed spending on X.

A loss of ad dollars has nonetheless seen Musk and Yaccarino scrambling to make up the difference, focusing on attracting paid subscriptions after a series of halfhearted attempts to woo back brands with efforts like the reinstatement of its ‘client council’ – a select group of ad industry leaders invited to share their input on platform-wide decisions.

Looking back on the first year of X under Musk’s rule, experts largely agree that the platform is sinking. “It’s a dumpster fire,” says Shiv Gupta, founder and chief executive officer at advertising education firm U of Digital. Though not all industry leaders put it so bluntly as this, the sentiment is resounding.

As Jasmine Enberg, a principal analyst at Insider Intelligence specializing in social media, says: “Right after the acquisition, I said that there wouldn’t be one catastrophic event that ends Twitter. One year later, that’s proven to be true. It’s been a series of self-inflicted wounds of varying severity that together have resulted in its demise.”

Enberg admits, however, that the platform’s slide into disarray hasn’t been without economic and social factors outside Musk’s control. “Usually when a social platform starts to fall, there are at least some major external factors at play – think the ‘TikTok effect’ on engagement and user attention, or the iOS changes on ad revenues,” she says. “Twitter’s ad business would have taken a hit in 2022 regardless due to the economic conditions, and Twitter’s relevance and user engagement was on the decline prior to the acquisition.”

Nonetheless, she says, “the advertiser exodus, the decline in users and engagement, and now the loss of the platform’s place as a central hub for news were almost entirely Musk’s doing.”

It’s a belief echoed by other experts. The last 12 months of X under Musk’s leadership have been “chaotic, very expensive and hugely damaging,” according to Matt Navarra, an industry analyst and leading social media consultant. “The platform has been spiraling out of control for a long period since he’s taken over. It’s chaotic in terms of the decision-making, and the swiftness and the speed of some of the changes, but also chaotic in terms of some of his backtracking or saying things are going to happen and … not following through.”

In assessing the extent of the damage, Navarra says, “the brand value of Twitter and X has been decimated by the decisions he’s made and the trajectory that X is on now.”

He draws attention to three key ways in which X has deteriorated as a result of decisions made by Musk: “the breakdown of the relationship” between the platform and advertisers; a dire lapse in the platform’s reliability when it comes to news and a crumbling relationship with journalists and publishers; and a flailing “ability for people to use the platform in any meaningful way – particularly at the moment, when there are people in parts of the world needing something like X to get messages out in desperate situations.”

The problems that X just can’t shrug

The biggest issues plaguing the platform today, experts say, include ongoing misinformation and content moderation problems; a beleaguered revenue model hamstrung by strained relationships with advertisers; and a clear dissonance in Musk’s and Yaccarino’s respective approaches to leadership.

The first stumbling block, X’s content problem, is deeply intertwined with the second – its relationship with advertisers and imperiled business model. And it’s an issue that experts expect will only grow worse in the coming year.

“The platform’s inability to combat misinformation – which is largely a result of X’s decision to amplify content from verified accounts and to rely on ‘Community Notes’ for content moderation – will keep advertisers away as the Middle East War continues and we enter an election year,” says Insider Intelligence’s Enberg.

But content moderation and misinformation are problems that Musk will be forced to face sooner or later. On October 10, an EU regulator issued a warning to the billionaire, urging him to crack down on the spread of misinformation and illegal content on X amid the worsening conflict in Israel and Palestine. Failure to comply with the bloc’s misinformation and propaganda laws could see X fined 6% of its annual revenue.

Meanwhile, despite Musk’s ongoing efforts to establish new revenue streams through subscription-based offerings, the payoff is yet to materialize. Internal company documents reviewed by The Information earlier this year indicate that only around 0.2% of monthly active users had signed up for the app’s first premium subscription offering, X Premium (previously known as Twitter Blue).

In Navarra’s estimation, “there aren’t any other revenue streams on the horizon that will be able to compensate for the loss in revenue from the decline in advertisers' interest in the platform.”

Then there’s the issue of leadership. Since Yaccarino was appointed in May, many have pointed out apparent paradoxes in the two leaders’ styles – and speculated on underlying tensions therein.

“Elon and Linda seem to have real dissonance in their approaches to the business and their public personas, regardless of what they say,” says U of Digital’s Gupta. “This is a problem, especially for the ad space, since the dissonance [is often] around the ad business. Even if Linda is doing ‘good’ things from the ad perspective, no one believes in them long term because of Elon.”

Yaccarino, who served as NBCU’s chairman of global advertising & partnerships for many years, has pushed to accommodate advertisers at X despite Musk’s blasé attitude toward them. In the last six months, she’s helped develop new brand safety tools, expanded the platform’s ad-revenue-sharing program for creators and reinstated the advertising ‘client council’ in an attempt to illustrate X’s receptiveness to brand input.

Nonetheless, experts see trouble ahead – thanks to Musk.

“[Yaccarino] is going to continually be faced with the challenge of an owner that will at times have opposite views to her own, and will continue to create all sorts of new problems and become even more volatile and mercurial,” says Navarra. “[This set of circumstances] makes it very hard for her to do her job and bring advertisers back on the site.”

So, what comes next?

As far as the next 12 months are concerned, the outlook for X is dim.

With major advertisers off the platform, ad rates have been driven down, lowering the barrier to entry for smaller brands. As a result, an array of relatively unknown brands have bought up media, but it’s ultimately created a lower-quality experience for users. Meanwhile, Musk continues to announce changes to the platform week after week.

And while strong, well-received product changes might incentivize greater engagement and could even attract some spurned advertisers, progress on that front has proven lackluster at best.

“Most product changes have not sat well with folks – [like X Premium], removing headline snippets, killing off the blocking feature – and the rebrand is a debacle,” says Gupta. “So it’s not like, ‘The product is getting better, so who cares about advertising? Eventually, that’ll come back.’ It’s more like, ‘OMG, the product and the ad product are going to complete shit.’”

“It feels like it’s dying a fast death,” he adds.

Others, including Enberg, agree that poor product development has hindered X’s growth potential. “Besides the loss in advertiser and user trust, X also has a failure to launch problem: There haven’t been any meaningful improvements to the platform in a year, and new product launches or features have been marred by delays, backtracking and technical issues. It’s hard to say where the platform goes from here, but Musk is no closer to his vision of an ‘everything app’ [than he was 12 months ago].”

As Musk continues to prioritize free speech and a hands-off approach to moderation, experts predict that the app could maintain popularity among right-leaning audiences but misinformation will continue to abound, ultimately pushing brands and mainstream users to more palatable alternatives like Meta’s Threads.

As far as a return to normalcy, most experts are skeptical. As Navarra puts it: “That bird is dead.”

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