Behind the Numbers: Episode Summary

Title: X Is Trending Again — What’s the Likelihood of a Comeback?
Release Date: May 27, 2025
Host: Marcus
Analysts: Emmy Liedman & Marissa Jones

Introduction

In this episode of EMARKETER’s Behind the Numbers, host Marcus delves into the recent merger between X, formerly known as Twitter, and Xai, Elon Musk’s artificial intelligence firm. The discussion revolves around the potential resurgence of X in the digital advertising landscape, the challenges it faces post-merger, and the shifting dynamics of its user base.

The X and Xai Merger: Objectives and Implications

The primary focus of the merger is to enhance content moderation and improve brand safety, which have been significant concerns deterring advertisers from investing in X.

• Marissa Jones [04:15]: "The merger is hopefully going to address some of X's core problems, especially with advertisers, by enabling better content moderation through Xai's technology."

• Marcus highlights that the merger not only aims to tackle immediate advertising issues but also positions X as a potential leader in AI development, aligning with Elon Musk's vision of transforming X into an "everything app."

Potential Benefits:

• Enhanced Content Moderation: Utilizing Xai's AI to better manage and moderate content, thereby improving brand safety.
• Financial Support: Increased cash flow from returning advertisers allows Xai to invest in necessary infrastructure like data centers.
• Strategic Positioning: Aligns with Musk’s long-term strategy to integrate AI deeply into the platform’s functionality.

Potential Risks:

• AI Mismanagement: If Xai’s AI exacerbates issues like hate speech, similar to post-acquisition trends noted by UC Berkeley, it could further deter advertisers.
• Integration Challenges: The success of the merger heavily depends on how effectively Xai's technology is integrated into X's existing framework.

Advertising Revenue: Challenges and Prospects

X has historically struggled to compete with giants like Meta and YouTube in generating substantial ad revenues.

• Marcus: "X's yearly ad revenues averaged about $1.5 billion per year from 2015 to 2020, and now they're estimated to be close to $1.3 billion." [09:44]

Current State:

• Revenue Decline: From $4.5 billion in 2022 to approximately $2.5 billion in 2024, with a slight rebound in Q4 2024.
• Market Share: Dropped from 1% to 0.4% of US digital ad spend.

Factors Affecting Ad Revenue:

• Brand Safety Concerns: Ongoing issues with content moderation have made advertisers wary.

• Legal Battles: The lawsuit between X and the World Federation of Advertisers further complicates trust and collaboration.

• Marissa Jones [05:38]: "Even a successful lawsuit likely won't help X become this advertising giant or significantly contribute to its everything app goal."

Forecast:

• 2025 Growth: Expected 18% growth in US ad revenue reaching $1.3 billion, with worldwide sales potentially hitting $2.3 billion.
• Sustainability Concerns: The projected growth rate will slow down to single digits in the following year.

User Base Migration and Competition

X has experienced a steady decline in its user base, prompting migrations to other platforms.

• Emmy Liedman [15:29]: "Meta has been more successful at garnering audiences by leaning into popular use cases like sports and partnering with organizations like UFC."

• Marissa Jones [16:13]: "Threads is a major competitor, resembling X and expanding its ads globally, which may attract advertisers uncertain about X's brand safety."

Competitors Noted:

• Threads: Expected to outpace X in user growth by 2026, leveraging Meta’s stronger reputation with advertisers.
• Blue Sky: Attracting users with figures such as AOC, appealing to liberal audiences.
• Meta: Utilizing strategic partnerships and popular content categories to retain and grow its user base.

User Decline:

• Marissa Jones [09:44]: "X has been losing users since Mr. Musk's takeover, with an expected decline from 52 million to 50 million US users by next year."

• Emmy Liedman [19:17]: Highlights that declining user engagement, especially among Gen Z, undermines long-term advertiser commitment.

Future Outlook and Strategic Considerations

The episode concludes with an analysis of whether X can achieve a sustainable turnaround and regain its former stature in the digital advertising realm.

• Emmy Liedman [18:15]: "Brands may be returning to X to maintain favorable relationships with political powers, but this might be a short-term strategy."

• Marissa Jones [19:17]: "Advertisers may stay due to political and legal pressures, but long-term commitment is doubtful if user decline persists."

Key Takeaways:

• Short-Term Rebound: Potential for a revenue uptick driven by strategic advertiser returns.
• Long-Term Sustainability: Dependent on reversing user decline and effectively leveraging AI for content moderation.
• Competitive Pressure: Strong competition from platforms like Threads and Meta could hinder X’s ability to reclaim its market position.

Forecast Summary:

• 2025: X sees its first revenue growth since the takeover, but still lags significantly behind competitors.
• 2026: User base continues to shrink, and ad revenue growth decelerates, casting doubt on the platform's ability to fully recover.

Conclusion

The merger between X and Xai represents a strategic move to address longstanding issues with content moderation and advertiser trust. While there are prospects for a short-term rebound in ad revenues, significant challenges remain in reversing user decline and effectively competing with robust platforms like Threads and Meta. The success of this merger and X’s future in the digital advertising landscape largely hinge on the seamless integration of AI technologies and the platform's ability to restore and enhance brand safety.

Notable Quotes:

• "If the XAI is being trained on that data, that could really just kind of exacerbate the issue, make it a bit worse." — Marissa Jones [05:38]
• "Threads is a major competitor, resembling X and expanding its ads globally, which may attract advertisers uncertain about X's brand safety." — Marissa Jones [16:13]
• "Brands may be returning to X to maintain favorable relationships with political powers, but this might be a short-term strategy." — Emmy Liedman [18:15]

This comprehensive overview encapsulates the critical discussions from the episode, providing insights into the complex interplay between platform strategies, advertiser behaviors, and competitive dynamics shaping the future of X.