Elon Musk's X apocalyptic moment

By Therese Poletti

In just the last few days, major advertisers, ranging from IBM, Apple, Lions Gate Entertainment, Walt Disney and Comcast have pulled their ads from X, the former Twitter

Is this the beginning of the end for X, the social-media site previously known as Twitter?

In the last two days, major advertisers, ranging from IBM Corp. (IBM), Apple Inc. (AAPL), Lions Gate Entertainment Corp. (LGF.A), Walt Disney Co. (DIS), even the European Union, have pulled their ads from X, after Elon Musk appeared to endorse antisemitic conspiracy theories and because these big spenders weren't thrilled with the algorithm's product placement nestled alongside pro-Nazi posts.

Earlier this week, Media Matters reported that ads for IBM, Amazon.com Inc. (AMZN), Oracle Corp. (ORCL), and Xfinity (CMCSA) were found next to content promoting Adolf Hitler and the Nazi party. Musk then tweeted that Media Matters was an "evil organization." On Thursday, IBM immediately suspended its advertising on X, and said in a statement that it was going to investigate the "entirely unacceptable situation."

Read also: Disney, Warner Brothers, Comcast are latest to pull ads.

The White House even weighed in after Musk on Wednesday replied to the post on X with the comment: "You have said the actual truth." The post said Jewish people hold a "dialectical hatred" of white people.

"It is unacceptable to repeat the hideous lie behind the most fatal act of antisemitism in American history at any time, let alone one month after the deadliest day for the Jewish people since the Holocaust," said White House spokesman Andrew Bates.

Late Friday, Musk was trying to undo some of the damage, but it was a day late and a dollar (several) short. His recently appointed CEO Linda Yaccarino had already tweeted Thursday afternoon that "discrimination by everyone should STOP across the board." Musk then tweeted that "Clear calls for extreme violence are against our terms of service and will result in suspension."

Initially, at least, the backtracking did little to stem the ad loss.

X was acquired by Tesla Inc. (TSLA) CEO Elon Musk last October for $44 billion, when Twitter was a public company, after a bizarre back and forth in which it was not even clear at times that he was serious about the purchase. Eventually, he completed the deal, and then took Twitter private.

This is not the first time X or Twitter has been at the center of a controversy starring Musk, but this could be the last straw for many. In one of his most famous mishaps on Twitter, Musk announced that he wanted to take Tesla private at $420 a share, and had "funding secured." That tweet led to a Securities and Exchange Commission lawsuit, and later a shareholder lawsuit. Earlier this year, a jury in federal court in San Francisco found that Musk was not liable in causing shareholder harm.

But Musk's inappropriate comments are now also starting to affect the brand of the electric vehicle company he also runs, as Tesla saw its shares tumble on Thursday after news about IBM and others' ad pulls. Even one of Tesla's most vocal supporters, investment manager Ross Gerber told CNBC that he has never seen a CEO of a company do so many detrimental things destroying the brand.

Advertisers are fleeing the social media company en masse at a time when X has already seen a huge drop in ad revenue under Musk's ownership. Earlier this year, the Wall Street Journal reported that employees would receive stock awards for the company based on a valuation of a much-leaner $20 billion, about half of what he paid for it. Musk has tried different ways to get a subscription model going, but the bulk of X's revenue comes from ads.

As more advertisers continue to leave X, and if the content becomes more hateful, by most mainstream measures, the service is either going to continue to become a marginalized, niche platform for the far and extremist political poles, or it will just die a slow death, as advertisers and users find it more difficult to stomach the increasingly hateful and discriminatory content.

One potential beneficiary could be Meta Platforms Inc. (META) which debuted an alternative platform Threads with a soaring start, only to see it quickly fizzle as users did not return, amid confusion about what Threads actually was, even if their accounts were easy to set up and establish with their Instagram followers. A subsequent push could now have more teeth.

This moment is clearly an existential crisis for the former Twitter, and an impossible time for Yaccarino, who was brought in to help grow its falling advertising business.

But at this point, there are many who will be happy if X ceases to exist.

-Therese Poletti

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11-18-23 1056ET

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