Following the US presidential election, it was reported that many users abandoned X, t​​​​​​​he social media platform owned by Elon Musk. Many users were concerned about Musk’s influence over the US elect​​​​​​​ion and the direction of X.

The platform is accused of being a place where people post racist, misogynistic, and​​​​​​​ untrue information. There is a cost to X as people leave the site because it loses revenues from advertising, subscription payments (the blue ticks users have to pay for), and data licensing (selling the data X collects).

In the social media market, substitutes for X include Bluesky, developed by Twitter founder Jack Dorsey, the German non-profit site Mastodon, and Threads, owned by Mark Zuckerberg’s Meta. Evidence shows these platforms are gaining market share at X’s expense.

Social media is a valuable market. It currently generates annual revenues of $251 billion and is expected to rise to $450 billion by 2028. However, some commentators see the market's social and political influence as more important than its monetary value. This could certainly be true if it positively influenced Donald Trump's election. You can also look at events such as the Arab Spring, Me Too movement, and Black Lives Matter as occasions that would not have been the same without Twitter/X.

One of the issues economists might reflect on is the market failure associated with the social media market. There were riots in the UK last summer that many people believe X contributed to because the false information posted on X incited people to violence. There is evidence that information about self-harm, suicide and eating disorders negatively affects the mental health of users.

It is also possible to consider a market failure when the world's richest people control the social media market, which has significant social and political consequences.

So when Musk said his aim for X was to create "a common digital town square, where a wide range of beliefs can be debated in a healthy manner", how has the reality of the social media market affected the welfare of people in societies across the world?

Questions for discussion

1. What are the human wants associated with individuals consuming social media goods such as X?

2. What are examples of the different factors of production used to produce a good like X?

3. How do social media businesses like X earn revenues?

3. Discuss the social costs and benefits to society of social media.