“Brands don’t like places of controversy” – L’Express

The art of shooting yourself in the foot. By clashing with Judge Alexandre de Moraes in Brazil in recent days, Elon Musk may have galvanized his fans. But with the suspension of X in the country, the billionaire is above all losing a market of several tens of millions of users. An economic fiasco that the social network, formerly known as Twitter, could have done without.

If X no longer publishes its financial statements, having become private, its situation is hardly cheerful. In its main market, the United States, the New York Times reports a 53% drop in its annual revenue in the second quarter in the United States (-25% compared to the first quarter). Twitter has always derived the vast majority of its revenue from advertising on the social network. A business model similar to that of Facebook or YouTube, which are also characterized by free access. However, under X, the relationship with advertisers has deteriorated considerably. A symbol: last November, Elon Musk told one of the biggest clients, Disney, to “go fuck themselves”.

The outburst came after months of lax moderation on X, allowing more and more conspiracy and hateful remarks to pass. A situation that caused the king of animation to flee the platform, just like IBM or Apple. “Brands don’t like places of controversy and debate, which are not conducive to consumption,” recalls Cyril Vart, partner at EY Fabernovel. The appointment as CEO of Linda Yaccarino, an advertising professional who worked for the prestigious NBC channel a few months earlier, also did not stop the exodus that began when Musk took power at the end of October 2022.

Half of the biggest advertisers have since reportedly deserted. And the situation continues to get tense. According to the advertising specialist MediaRadar, the brands still present spent 24% less on X in the first half of 2024, compared to that of 2023. “Now it’s war,” posted Elon Musk on his feed in early August, while his right-hand woman Linda Yaccarino formalized the launch of legal action against a handful of advertisers accused of boycotting the network. “A very bad strategy that could scare the sector a little more,” sighs Cyril Vart. In a study Published on Thursday, September 5, Kantar, a world leader in market research, predicts that in 2025, X will be “the largest decline recorded by a major global advertising platform”. Around 26% of marketers could again reduce their spending there.

Diversification

Bought at the high price of $44 billion to “liberate freedom of expression”, this political tool recently put at the service of the Republican candidate for the White House Donald Trump has lost a good part of its value. At the end of 2023, it had officially fallen to $19 billion. It would now be around $12 billion, a drop of 72% according to estimates published at the end of last week by the asset manager Fidelity, and made on the basis of its own investment.

Even though the damage is still only “virtual”, the banks behind the 13 billion loan that made it possible to finalize the operation have stated to the Wall Street Journal that this is already the worst “deal” for them since the 2008 financial crisis. The inability to sell this debt prevents these institutions from making other loans or acquisitions, and even cuts bankers’ salaries. It’s hard to tell them to go to hell. Musk may have to put his hand in his pocket again, why not by selling Tesla shares, the media predicts Fortunein order to mop up his losses. Or to engage a little more his own “empire”, he the richest man in the world, owner of firms such as Space X in space or Starlink in telecommunications. A strategy that is not without danger – his boards of directors can ask him for accounts – but buys a little time.

“A restructuring of the company, leading to a reduction in its costs, and a deep diversification of X’s revenues was initiated by Musk, whose present and future successes are unknown,” qualifies Julien Pillot, an economist and expert in digital technology and a lecturer-researcher at Inseec Business School. The star engineer dreams of X becoming a “super-app”, integrating payment, artificial intelligence functionalities via Grok and a host of other conveniences. A good thing, on paper. “No platform, from social networks to media, including video streaming, can rely solely on advertising or on paying everything. The two models must coexist,” underlines Michael Mansard, a specialist in the subscription economy at Zuora. So all is not lost.

Bluesky, Threads… The competition is here

The fact remains that putting this into practice is complicated. Its first “premium” service, materialized by a blue check mark – a recycling of the old authentication check marks – is an illustration of this. A recent work published across the Atlantic, Character Limit: How Elon Musk Destroyed Twitterdetailed the somewhat chaotic birth of this offer, up to its price – $8 per month – decided by King Musk himself, on the sole basis of consumption in the kingdom of Starbucks lattes. In short: nothing very serious. “The associated functionalities do not justify this price for the moment”, confirms Michael Mansard. Last year, the work of a researcher on the platform made it possible to identify only 1% of users converted into subscribers. Often inclined to self-satisfaction, Musk has never really boasted about the success of his service, and in April, distributed it for free to accounts followed by premium members, in order to convince them to join.

Musk’s room for maneuver, whether in advertising or subscription, is shrinking by the day. The social network has around 250 million daily active users known as monetizable, up slightly by 1.6% in the second quarter of 2024 (it was 3.9% last year at the same date), according to data extracted by the Financial Times. Before the acquisition, the trend was rather in double digits. Scandals and political quarrels, such as in Brazil or with European Commissioner Thierry Breton – whom he also insulted – as well as Musk’s personal outings, clearly do not please all Internet users. Various media and political figures who used to populate the platform, such as Paris Mayor Anne Hidalgo, have also announced that they are withdrawing from it permanently.

Above all, substitutes have emerged, such as Bluesky, from Twitter founder Jack Dorsey, or Threads, launched by Meta. It is on these two networks that millions of Brazilians have landed in recent hours, local newspapers reported. “If we listen to Elon Musk, Twitter is essential. If it remains very powerful, the reality is that it is no longer,” asserts Cyril Vart. The advertisers on whom X depends also seem to have understood this.