X Embraces A Strategic Shift Away from Traditional Ad Formats Amid Revenue Struggles

In a noteworthy move echoing a broader transformation under Elon Musk's stewardship, X, the rebranded version of Twitter, has announced a significant departure from its time-honoured advertising strategies
Elizabeth Jenkins-Smalley

Elizabeth Jenkins-Smalley

Editor In Chief at The Executive Magazine

According to an insightful report by Axios on Monday, the company has unveiled plans to retire a long-standing advertising format that encourages users to directly follow accounts from their timelines. This strategic overhaul comes in the wake of mounting concerns surrounding the corporation’s ad revenue performance following Elon Musk’s acquisition just last year.

The advertising innovation under scrutiny, known as “Follower Objective” ads, adeptly positions a tweet on the timeline of individuals who are not already following the advertiser’s account. Accompanied by an easily clickable “follow” button, X touts these ads as an effortless conduit for rapid follower expansion.

Although the Follower Objective ad format is currently visible as an option on X’s business website, a confidential client communication dated August 10, obtained by Axios, disclosed that X has initiated a process of phasing out this ad unit as of last week. This decision represents a watershed moment as Follower promotions stand as the very foundation of X’s advertising lineage and yield a staggering annual revenue of over $100 million, as cited by an unnamed source in the Axios report.

The transition appears to have caught many clients off-guard, as it swiftly follows a recent New York Times exposé that underscored a precipitous decline in Twitter’s U.S. ad revenue. Over the five-week period starting April 1, the company witnessed a stark 59% plunge compared to the same interval in the prior year, a downturn that coincided with the ascent of Elon Musk.

A spokesperson for X conveyed to Axios that the organisation is committed to devising novel pathways for clients to augment their follower counts. This shift, characterised as an integral component of a broader endeavour to optimise the X user experience by prioritising innovative content formats, is echoed by the company’s diverse array of ad offerings—ranging from images, videos, and carousels to textual displays and captivating “moment” ads, tailored to spotlight a curated collection of tweets.

Elon Musk, who completed his acquisition of Twitter last October and formally christened it X in the recent month, has been vociferous about his aversion to traditional advertising and his aspiration to curtail the company’s dependence on such revenue streams. This stance was most memorably encapsulated in his 2019 tweet where he candidly declared his detestation for advertising, particularly as it pertains to Tesla. However, intriguingly, advertisements constituted an astonishing 90% of Twitter’s total revenue as of May 2022, as illuminated by the New York Times. Musk’s dual role as an advocate for change and a pragmatist striving to buttress the bottom line has precipitated various stratagems to fortify X’s fiscal footing. One notable instance unfolded in November, when he announced Twitter’s offering of blue checkmarks—symbols of verified accounts—for a monthly fee of $8. This premium feature bestows benefits such as enhanced reply visibility and tweet editing privileges, effectively democratising verification for those willing to invest. In a bid to galvanise revenue growth, Twitter launched an “aggressive” incentive in December, vowing a dollar-for-dollar match on ad expenditures exceeding $500,000—a gambit aimed at incentivising advertisers to ramp up their commitment. More recently, X unveiled plans to expand the ambit of brand safety measures, demonstrating an ardent commitment to cultivating a secure environment for advertisers.

Musk’s impactful influence on X’s trajectory has not been without its share of setbacks, as several renowned brands chose to pause their advertising expenditure on the platform in the aftermath of Musk’s stewardship. The enigmatic entrepreneur attributed this development to European and North American advertisers ostensibly aiming to undermine the platform’s financial stability. By the close of January, a stark realisation emerged: more than half of X’s top-tier advertisers, featuring illustrious names such as Wells Fargo, Jeep, and Coca-Cola, had abstained from platform investments during the initial weeks of the year, as corroborated by CNN. Moreover, a chorus of industry insiders echoed concerns about “misleading and toxic content” proliferating under Musk’s regime, causing a ripple effect that strained X’s relationships with clientele.

In summation, the course charted by X under Elon Musk’s stewardship is replete with dynamic shifts aimed at fortifying the company’s competitive positioning, while juggling the demands of revenue growth and user satisfaction. The phasing out of the Follower Objective ad format marks a pivotal transition in this journey, signalling a departure from the traditional in favour of the innovative—a hallmark of Musk’s strategic vision for X’s future.

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