Will X get sidelined as advertisers prioritise brand safety and reputation?

A couple of weeks ago, the ever-controversial Elon Musk declared ‘war’ against advertisers and filed a lawsuit accusing a coalition of advertisers of antitrust violations. The lawsuit alleges that the group conspired to 'boycott' advertising on X (formerly Twitter) and that the Global Alliance for Responsible Media (GARM), an ad industry organisation advised brands to withhold billions of dollars in advertising from the platform.

Followed by this accusation, GARM announced it would shut down, stating that it doesn’t have the financial resources to continue operations while fighting the lawsuit in court. 

The advertising group managed by the World Federation of Advertisers, aimed to assist brands in avoiding the placement of their ads alongside illegal or harmful content. With over 100 large companies under its umbrella, members included CVS, Unilever, Mars, and the Danish energy firm Ørsted, all of whom are named as defendants in the lawsuit filed by Musk. 

X has seen a reduction in advertisers ever since Elon Musk took over the company and allowed insensitive content to ‘support’ free speech. Last year, advertisers like IBM, Apple, Comcast, and NBCUniversal pulled their ads out of the app due to the platform allegedly pushing right-wing content such as 'white pride' and 'anti-semitism', supporting Hitler and the Nazi party. 

A year later, the situation hasn’t seen an improvement. The platform's policy on hateful conduct states that users ‘may not attack other people on the basis of race, ethnicity, national origin, caste, sexual orientation, gender, gender identity, religious affiliation, age, disability, or serious disease’ and prohibits any targeting of people or groups with media that refers to or depicts the Holocaust or ‘symbols historically associated with hate groups’. 

However, recently the World Bank ceased all paid advertising on X after a CBS News investigation observed promoted advertisements from the company showing up under a racist post from an account that posts pro-Nazi and white nationalist content. Similarly, there are reports of the micro-blogging platform displaying ads next to harmful and offensive content, particularly in the context of race. 

This has had an impact in India, too. 

Raghav Bagai, Co-founder, SW Network says, “Advertisers are increasingly prioritising brand safety, and associating with potentially controversial topics could erode consumer trust. While the allure of reaching highly engaged audiences is strong, the potential damage to brand reputation cannot be ignored.”

The risk of potential harm to brand reputation aside, X has been vying for advertiser attention, even if to increase revenue for the platform. Despite the company introducing premium subscriptions to make up for an advertising-free system, it lacks the mark as of now. Advertising accounts for about 90% of the company's income, as reported by The New York Times. However, advertisers spent nearly $744 million on X in the first half of 2024, which is about 24% less than the $982 million spent during the same period in 2023, according to MediaRadar.

Are X’s ad formats helping?

While the advertising might have gone down, there is a reason why brands are using the platform. As per leaders in the digital space, advertisers prefer the platform to tap into real conversations, considering users are the most active in terms of sharing, replying and commenting. Advertisers tap into trending topics and current events to reach a highly engaged audience. 

Alongside this, advertisers are provided with several ad formats to reach their consumers. Ravi Bhaya, CEO Ideatelab, notes, “With features like targeting, real-time engagement, detailed analytics and ad formats such as Twitter Spaces (audio ads), Product Explorer ads and the new Trend Genius, we find X to be an effective platform for advertisers to execute both, strategic and creative campaigns.”

In July 2024, right before the Paris Olympics, X launched ‘Trend Genius,’ a new product that uses AI to optimise ads by targeting promotions during trending conversation peaks. According to the platform, the feature allows advertisers to hand-select the conversation topics they want to align with, anything from the Olympics or professional sports leagues, to fashion, music, AI, and beyond. This appears to be promising considering the platform’s effectiveness in generating real-time conversations. 

Shradha Agarwal, Co-Founder and CEO, Grapes comments, “Considering that X is the least preferred platform by the advertisers, the decision to roll out ‘Trend Genius’ is very likely to upgrade the offering of the platform to attract the ad industry. Coming with the ability to leverage AI, it identifies trending conversations for optimising ads.” 

With the addition of the feature, Agarwal mentions that it can harp on trending topics and capture the moment such as Olympics, IPL, Budget, and more. “But it will be able to create impact only if the numbers increase, without viewers, the entire purpose of the feature will be defeated.”   

During the Paris Olympics, X claimed that there were more than 238 million posts related to the sporting event, driving a cumulative 103 billion impressions in the app. However, the platform’s revenue keeps declining. 

X supports programmatic advertising, which is one of the most effective ad placement methods, accounting for 85% of total ad impressions. However, the platform’s contentious stance on free speech, content moderation, and overall reputation have led to some scepticism about its effectiveness, according to Ankush Vij, Vice President - Media, Hashtag Orange. 

This stance could potentially cause apprehension among advertisers. Vij continues, “The automated nature of Trend Genius means that ads may be placed alongside controversial topics and damage brand reputation. With brands becoming increasingly vigilant about the placement of their ads, this feature could heighten apprehension among advertisers.”

Additionally, X’s AI chatbot Grok, limited to paid subscribers, recently debuted a new image generation tool. The tool led to a flood of bizarre and offensive AI-generated images of political figures and celebrities that lacked most of the safety guardrails. 

Ravi Bhaya of Ideatelab says, “Given X’s recent criticism of its Grok AI news summaries, the more acute concern is around the accuracy of X’s AI models and the speed with which machine learning can decipher real content. This, in turn, can result in advertisers’ apprehension about brand safety, content moderation and risk to reputation.” 

Vij believes that the introduction of Trend Genius is steering the platform towards more refined strategies that provide advertisers with improved targeting and performance metrics.

“However, innovative features like Trend Genius alone are not enough to convince advertisers of the platform’s value. Addressing brand safety concerns and offering better control over where ads appear through transparency will play a crucial role in enhancing advertiser satisfaction and fostering trust.”

- Ankush Vij

Keeping advertisers on the platform

Despite all the concerns related to brand safety and non-regulation of harmful content on the platform, a recent TAM AdEx report stated that X is the leading publisher on digital advertising, with a 39% share of ad impressions in January-March 2024. 

SW Network’s Raghav Bagai notes, “X remains a dominant force in digital advertising due to its massive user base and real-time engagement potential. The platform's ability to reach a wide and diverse audience is quite unique.”

He continues that if the platform can address brand safety and transparency concerns effectively, it can solidify its position as a leading advertising platform.

On the other hand, Naresh Gupta, Co- Founder & CSO, Bang in the Middle says, “The issue with X (Twitter) in India is its penetration and thus the potential impact on overall media. Twitter works for only two categories: Politicians and ecom brands. For almost all other segments X's reach is miniscule and thus is not the most important channel in media mix.”

While the platform sees an upsurge in advertising around sports events like Paris Olympics and the ad formats like the Trend Genius tool will be used by select brands to ride the conversation, Gupta mentions that the total revenue of the platform in India is ‘tiny’. 

To grab a larger pie in advertising, Gupta notes, “At just 200 crores, it is way smaller than Google and Meta. I do not see X becoming a platform that challenges either Google or Meta in the near term, X needs a much greater penetration and user sign-ups to grab share from the vast digital advertising market of India.”

Ideatelab’s Ravi Bhaya comments that there are areas that can be enhanced to drive attention to the platform. 

“Areas around better content moderation, rebuilding the verification system, data licensing, building transparency in the areas of algorithms and policies and lastly, robust brand safety mechanisms can help build advertiser trust."

Hashtag Orange’s Ankush Vij comments that how X’s newest strategies play out will be key in earning advertisers’ complete trust and ensuring they fully reinvest in the platform. 

Considering Paralympics is around the corner, it would be interesting to how the platform’s new ad tools and the concerning insensitive posts play out.

While X wants advertisers back, the recent lawsuit against them could only hamper revenue growth. As the platform navigates this legal and reputational challenge, its ability to address brand safety concerns, improve content moderation, and regain advertiser trust will be crucial for its future success in digital advertising. 

Despite the challenges of the platform, however, X remains influential in driving conversations around significant cultural events and advertisers value this ability to engage with users who shape public discourse and drive trends, as per experts.