Podcast Summary: Behind the Numbers – "Can X Stem User Declines and What the Company Might Turn Into in 2025?" | December 2, 2024

Introduction

In this episode of Behind the Numbers: an EMARKETER Podcast, hosted by eMarketer, analysts Marcus Johnson, Jeremy Goldman, and Daniel Konstantinovich delve into the current state and future prospects of X (formerly known as Twitter). Released on December 2, 2024, this episode titled "Can X Stem User Declines and What the Company Might Turn Into in 2025?" explores the significant user declines since Elon Musk's acquisition, the fluctuating advertising landscape, and the strategic maneuvers that could shape X's trajectory by 2025.

1. Current State of X: User Declines and Platform Changes

The podcast begins by addressing the substantial decline in X's user base since Elon Musk's takeover two years prior. The valuation of X plummeted by 75%, dropping to approximately $9 billion, and daily active users have decreased notably across key regions:

• United Kingdom: Active daily users fell from 8 million to less than 6 million over the past year.
• United States: A decline of about 7 million users from 59 million in 2022 to 52 million projected in 2025.
• European Union: Users decreased by 5% year-on-year in the first half of 2024.

Jeremy Goldman attributes the user decline to X's shift away from user-centric policies, highlighting that reduced content moderation has alienated a portion of the user base. He states, “... it turns out generally speaking, broad content moderation is not a bad thing. It tends to attract users because it gets the 5 to 10% of whatever less pro social content off of the platform” (05:18).

Daniel Konstantinovich echoes these sentiments, noting that influential users such as journalists and news publications are leaving, which diminishes the platform's appeal and reliability. He adds, “The quality of information there has really gone down. And I think that is what made X or Twitter a platform with some degree of mass appeal” (07:44).

2. Advertiser Dynamics: Declines and Renewed Interest

Despite the ongoing user decline, there has been a recent resurgence of advertisers on X. Historically, X's share of US media ad spending was diminishing, dropping from 0.8% in 2021 to 0.7% in 2022, with ad revenues halving between 2022 and 2023. However, major brands like IBM, Comcast, Warner Brothers, Discovery, and Disney are beginning to return to the platform.

Daniel Konstantinovich suggests that this return may be strategic, aiming to gain favor with Elon Musk or to influence regulatory landscapes under a potentially Trump-aligned administration. He explains, “If you're one of these companies that is seeking to get through a regulatory hurdle in acquiring someone... advertising on X is probably in your interest, and you can devote a not majorly significant portion of your spending as an olive branch in exchange for something more significant” (13:16).

Jeremy Goldman concurs, likening the advertisers' return to “...giving somebody a small tip just to ensure that they don't spit in your food” (14:47). He also notes that despite Fidelity cutting its valuation of X by 79% since Musk's purchase, the platform's role in shaping public discourse remains influential.

3. Elon Musk's Strategic Influence and Platform Vision

A significant portion of the discussion centers on Elon Musk's motivations behind acquiring X. Marcus Johnson references Dan Primack of Axios, who posits that Musk's acquisition was driven more by a desire for power than profit. Primack argues that Musk leveraged X to shape public opinion during elections, thereby increasing his influence without corresponding financial returns. This strategic positioning has potentially elevated Musk to become "the most powerful unelected American ever," benefiting his other ventures like SpaceX, Tesla, and Xai, which rely heavily on government contracts (10:09).

Daniel Konstantinovich expands on this by suggesting that Musk values X for the control and influence it grants him over news cycles and public discourse. He posits, “the amount of influence and control that it gives him over news cycles was also something he really took into consideration during the acquisition” (10:09).

4. Future Outlook: X in 2025 and Beyond

Looking ahead to 2025, the analysts discuss the potential paths X might take:

• Continued User Decline: Daniel Konstantinovich anticipates that X will likely continue its steady decline unless significant changes are implemented. He emphasizes that the platform will probably remain focused on Musk's vision, serving his political and personal interests rather than broad user engagement (16:06).

• Emerging Competitors: With various competitors like Blue Sky gaining traction, X's position in the social media landscape could be challenged. The upcoming episodes will explore Blue Sky's surge and staying power, indicating a shift in the competitive dynamics of social platforms.

• Banking Ambitions: Marcus Johnson references Alex Heath of The Verge, who points out that X was slated to transition into a comprehensive financial platform (“a bank”) by the end of 2024. This ambitious goal raises questions about X's capacity to handle financial services alongside its existing social media functionalities.

Jeremy Goldman remains cautiously optimistic but underscores that X lacks a compelling reason to receive substantial investment for platform improvements. He suggests that, aside from minor enhancements, X will likely remain "the same public square that it's been of late" with limited investments in content moderation and platform stability (17:14).

5. Conclusion

The episode concludes with a consensus that while X faces significant challenges in user retention and advertising revenue, its strategic value to Elon Musk and its role in influencing public discourse provide a unique justification for its continued operation. The analysts agree that the platform's future will depend heavily on how it balances Musk's personal and political objectives with the need to maintain a viable, user-friendly environment amidst rising competition.

Marcus Johnson teases the next episode focusing on Blue Sky, signaling an ongoing exploration of the evolving social media ecosystem.

Notable Quotes:

• Jeremy Goldman (05:18): “... it turns out generally speaking, broad content moderation is not a bad thing. It tends to attract users because it gets the 5 to 10% of whatever less pro social content off of the platform.”

• Daniel Konstantinovich (07:44): “The quality of information there has really gone down. And I think that is what made X or Twitter a platform with some degree of mass appeal.”

• Jeremy Goldman (14:47): “It's like when you give somebody a small tip just to ensure that they don't spit in your food.”

• Daniel Konstantinovich (10:09): “the amount of influence and control that it gives him over news cycles was also something he really took into consideration during the acquisition.”

Final Thoughts

This episode of Behind the Numbers offers a comprehensive analysis of X's struggles and strategic maneuvers under Elon Musk's leadership. By examining user trends, advertising dynamics, and Musk's overarching influence, the podcast provides valuable insights into what X might look like in the near future and how it fits into the broader digital media landscape.