It Sure Looks Like Musk’s Newfound Power Is Scaring Advertisers Back to X

Musk’s nearly $300 million gamble on the re-election of President Trump continues to show dividends. A new report in the Wall Street Journal suggests that advertisers are returning to X in order to avoid being added to an ongoing lawsuit by the company or see their own business dealings targeted by the Trump administration.

The report starts by noting that a major advertising agency called Interpublic is currently seeking to merge with rival Omnicom for $13 billion. While that might have stoked normal anti-trust concerns under the Biden administration, as a consolidated marketer would have more leverage to seek favorable ad prices, it appears that X sees it as an enviable opportunity to strike a quid pro quo deal:

A lawyer at advertising conglomerate Interpublic Group fielded a phone call in December from a lawyer at X. The message was clear, according to several people with knowledge of the conversation: Get your clients to spend more on Elon Musk’s social-media platform, or else.

Advertisers abandoned Twitter, now X, in droves immediately following Musk’s $44 billion purchase of the company, while they waited to see how Musk’s loosening of content moderation would play out. Musk famously told corporate executives including Disney CEO Bob Iger to “go f**k” themselves over their cessation of spending, saying they were directly silencing free speech by opting out of the service.

It is important to understand in context that X has never been a great place to advertise, with an audience much smaller than the likes of Google, Facebook, or Amazon; and comparatively crude targeting abilities. The last year before Musk took over the company, Twitter reported annual revenue of $5.1 billion, far below its rivals. Furthermore, advertisers tend to be risk averse, seeking to appear alongside “safe” content so as not to appear to be endorsing harmful material like Nazi imagery. X has added some tools that are supposed to let advertisers avoid being placed around questionable content, though being on the platform at all could be seen as an indirect endorsement.

But Musk won the gamble of a lifetime, so X does not need to be a good place to advertise. CEOs across industry have been lining up to placate President Trump, and by proxy that means Musk as well. Musk’s growing power in Washington includes using X as a megaphone to move legislators in whatever direction he sees fit, with President Trump essentially giving Musk the remit to slash entire agencies and make policy on his own—DOGE was Musk’s own idea. When he posts, Republican lawmakers follow. Directing lawmakers to scrutinize deals like the Interpublic-Omnicom merger could be as easy as throwing off a quick post.

Recent reports suggest that X’s revenue remains far below where it was immediately prior to Musk’s acquisition, raising into question whether advertisers are returning to previous spending levels or are merely tossing X some token dollars. It may well be the latter:

“We now see brands returning in quite significant numbers, because the easiest route is to just spend a minimum viable amount on the platform,” said Ebiquity’s Schreurs. “Not because they want to advertise there and run their ads adjacent to the content on X, but because they are afraid of legal and political ramifications of not doing so.”

Following Musk’s takeover of X and the sudden drop in advertising, the company sued a group of advertisers claiming collusion. An industry group called GARM was created and outlined a series of safety guidelines brands should use to decide whether to advertise on a platform; X said it targeted the company directly.

Whether the case has merits or not, X has dropped advertisers from its lawsuit when they have shown a willingness to restart spending on its platform, and the Journal reports that CEO Linda Yaccarino has directly implied new advertisers could be added to the lawsuit if they do not buy ad packages:

One ad-buying executive said Yaccarino brought up X’s antitrust litigation during their recent discussion and detailed X’s intention to find out which agencies and advertisers colluded to withhold spending from X.

The Journal has reported that the likes of Amazon, Apple, and Verizon have recently returned or are planning to return to X.

Musk’s $44 billion deal to buy Twitter once seemed like the worst business deal ever, but may end up being the best. He has managed to quickly spin up a related AI company that uses X’s data for training, and can now seemingly get an endless supply of cash from investors seeking to be close to power. Bloomberg reported on Wednesday that X is looking to raise new funding at its original $44 billion purchase price after the valuation of the company had been slashed for years.