Last week Elon Musk launched an extraordinary verbal attack on advertisers who have withdrawn advertising expenditure from his social media platform, X. On November 15 Musk endorsed an antisemitic post on X and this was enough to push some of the world’s leading brands including Apple, Disney, and Walmart away from the social media platform. 

This is a major blow for X which has lost 50 percent of its annual advertising revenue over the last 12 months down from $ 4 billion to $ 2 billion. As a business X's revenues and profits are almost entirely dependent on advertising and developing other revenue streams has proved very difficult.

An alternative funding method for X would be to use a subscription-based service and offer additional services as a video call product similar to Zoom. Social media analysts are doubtful whether users of X would be prepared to pay for enough subscriptions to generate the revenue needed to cover the shortfall from the loss in advertising. 

X’s difficulties seem to have grown under Musk’s ownership. Under its former owners, Twitter only had two profitable years and was not a business on a particularly sound financial footing when Musk took it over. One issue that adversely affected X when Musk took control was his rather chaotic leadership and his decision to make about half of the company's employees redundant. This was particularly problematic on the technical side where so many skilled workers were lost. The content on the X platform has also become more extreme as Musk allowed greater ‘freedom of speech’ and this has attracted more controversial users. A more chaotic, extreme business did not sit well with advertisers. The change from the strong Twitter bluebird brand to the darker X brand was also less attractive to advertisers. 

Other factors in the social media market may well have worked against X. Meta has launched its own platform, Threads which is a very close substitute to X and has attracted 137m users, although it is still well behind X. The market itself is a difficult one to analyse with differing user platforms like TikTok and YouTube adding to the media landscape and increasing the competition for X to attract advertisers. 

There is a risk that X could go bankrupt and fail. The business was bought using significant amounts of borrowed money and the interest payments on these funds are extremely high. Musk himself has the wealth to cover X's losses but even he may be reluctant to continue to fund a business in such difficulties. 

Possible questions to discuss with a class

1. How does X raise revenue?

2. Why are advertisers withdrawing their business from X?

3. What are the substitutes for X in the social media market?

4. Discuss the consequences for different stakeholders of the failure of X.