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Major advertisers halt spending on X after Musk’s controversial engagement

Major advertisers halt spending on X after Musk's controversial engagement © Reuters.

NEW YORK – A series of high-profile companies have paused advertising on the social media platform X following Elon Musk’s recent engagement with content that has been criticized for antisemitic connotations. This situation underscores the growing concerns over content moderation and brand safety in digital advertising.

The wave of advertiser withdrawals began on Thursday when IBM (NYSE:) pulled its ads from X after a Media Matters report showed their ads displayed alongside anti-Semitic messages. This action came amidst other film studios like Warner Bros and Paramount joining the boycott, highlighting an industry-wide concern about brand safety. Linda Yaccarino, CEO of X and former NBCUniversal executive, has been working on improving brand-safety tools for advertisers, emphasizing the company’s stance against hate speech amidst a backdrop of increasingly lax content moderation rules.

By Friday, the White House had entered the fray with Andrew Bates condemning Elon Musk for supporting claims reminiscent of replacement theory associated with the Israel-Hamas conflict, an ideology cited as inspiration for America’s most fatal act of antisemitism at the Tree of Life synagogue. A NewsGuard study also revealed misinformation spread by paid X subscribers about Israel-Hamas tensions. In response to the mounting criticism, Musk announced a crackdown on calls for violence by Palestinian supporters on the platform, instituting a ban on violent incitement using terms like “decolonization” and “from the river to the sea.” However, this move was slammed by Omar Shakir from Human Rights Watch for suppressing free speech.

On Saturday, concerns over brands’ ads appearing beside offensive content led companies such as GM and VW to pause promotions on X amidst rising hate speech and misinformation fears including foreign propaganda influence. Despite Musk’s announcements of advertiser return, ad revenue plummeted by half.

The situation escalated Today as reports revealed that Disney, Lionsgate, Paramount Global, Apple (NASDAQ:), and IBM had paused their advertising campaigns with X amid Musk’s approval of divisive expressions and plans to loosen content moderation rules. This move is particularly significant considering Apple’s substantial annual ad spend of $100 million. Lionsgate directly attributed their decision to Musk’s tweets.

These developments may signal a shift in how advertisers engage with online platforms, potentially compelling social media companies to adopt more robust content management practices to ensure transparency and responsibility in digital environments. Jasmine Enberg from Insider Intelligence has highlighted how Musk’s leadership style could risk brand safety and alienate both users and advertisers, especially when controversial content is propagated by platform leadership.

As companies reevaluate their advertising strategies in light of these events, the severe impact on X’s financial health is becoming apparent. The platform faced scrutiny from regulators investigating its practices while grappling with decreased advertiser support, dwindling user engagement, and significantly reduced staff numbers since Musk’s takeover. This story represents a critical moment for social media platforms as they navigate the complex intersection of free speech and the need for responsible content moderation.

InvestingPro Insights

In light of the recent events, it’s crucial to consider the financial metrics and trends that could potentially impact X’s performance. According to InvestingPro’s real-time data, X has a market cap of $7620M and a P/E ratio of 7.56 as of Q3 2023, indicating a relatively low valuation compared to earnings. However, the company’s revenue has been declining at an accelerated rate of -18.35% over the last twelve months as of Q3 2023.

InvestingPro Tips highlight two significant observations. Firstly, management has been aggressively buying back shares, which often signifies confidence in the company’s future prospects. Secondly, the stock generally trades with low price volatility, which may be appealing to risk-averse investors.

For those interested in more detailed insights, the InvestingPro platform hosts numerous additional tips and data points. Currently, InvestingPro is offering a special Black Friday sale with discounts of up to 55%. With this subscription, users can access an array of tips and data to make informed investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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