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Marcus Johnson (00:00):

Got an e-commerce challenge, Awin has you completely covered with Awin's affiliate platform. Brands of all sizes, small, large, and extra medium, can unlock endless marketing opportunities, reach consumers literally everywhere. Not literally, but most places. And choose partners that fit their goals, control costs, customized programs, and drive real results. Learn more at awin.com/emarketer.

(00:34):

Hey gang, it's Monday, August 4th. Jasmine, Marisa, and listeners, welcome to Behind the Numbers, an eMarketer video podcast made possible by Awin. I am Marcus, and today I'm joined by two people, let's meet them. We start with our vice president and visible analyst covering social media, living in California. It's Jasmine Enberg.

Jasmine Enberg (00:52):

Hello, Marcus. Hello, everyone.

Marcus Johnson (00:55):

Hello there. And we also have with us our newsletter analyst living on the other coast in New York. It's Marisa Jones.

Marisa Jones (01:01):

Hi, I'm excited to be here.

Marcus Johnson (01:03):

Welcome in. Welcome in. Today's fact, it's about the Appalachian Trail. Oh, I should say that again [inaudible 00:01:13] because... What's that?

Jasmine Enberg (01:14):

It's not bears. It's related. Adjacent.

Marcus Johnson (01:17):

It is related. Before we were talking about bears for longer than we should have. And Jasmine thinks it's okay to introduce yourself to a bear. Marisa, on the correct side of the argument, thinks no.

Jasmine Enberg (01:33):

Way to twist my words, Marcus.

Marcus Johnson (01:37):

Jasmine tried to hug a bear once, it went poorly. [inaudible 00:01:41]-

Jasmine Enberg (01:40):

I promise you that is not the story. But I feel like I've said it so many times now that we should probably move on.

Marcus Johnson (01:47):

It's the story. The Appalachian Trail though. Yeah, rather coincidentally, we are talking about nature and trails and where you might find bears. It runs about 2,200 miles across 14 states, from Georgia to Maine. It is the longest hiking-only footpath in the world, according to the Appalachian Trail Conservancy. They're biased, so who knows? Have they measured everywhere? We'll trust them. Each year, millions of folks hike at least a slice of it, but only around 3,000 people attempt a full through hike, which usually takes five to seven months. That means hikers often start in spring and wrap up in the fall, passing through all four seasons on foot. Of those who set out to finish the whole thing, only about 25% actually do, according to the National Park Service.

Jasmine Enberg (02:44):

Is that just because they decide to stop? That sounded very ominous.

Marcus Johnson (02:49):

Wait. Well, now... Yes. Well, now, we all... Did they? We'll never know. This is why you shouldn't hug bears. Bad things happen.

Jasmine Enberg (03:02):

Okay, I did not hug a bear.

Marcus Johnson (03:04):

Twice.

Jasmine Enberg (03:05):

I said I have seen bears.

Marcus Johnson (03:08):

Up close whilst [inaudible 00:03:10]-

Jasmine Enberg (03:09):

Two very different things. From a safe distance.

Marcus Johnson (03:13):

Yeah, but they're so fast. Right, Marisa? There's no such thing as a safe distance, that's the problem.

Jasmine Enberg (03:18):

According to the National Park Service, there is a safe distance.

Marcus Johnson (03:21):

That's what they want you to think.

Jasmine Enberg (03:24):

I don't remember what it is off the top of my head.

Marcus Johnson (03:27):

[inaudible 00:03:27] not helpful then. Jasmine's like about 10 feet away, "Is this right? It doesn't feel... He's moving pretty fast." Tara Dower, we have to mention her. The British newspaper, The Guardian, was noting that she, in September 2024, set a new record completing the trail in just under 41 days, beating the previous record by more than 13 hours. That means she was traveling a distance of more than two marathons per day over mountains. Probably moving that fast because she was being chased by a bear. Anyway, today's real topic. What Ms. Yaccarino's exit says about X.

(04:08):

Linda Yaccarino goes from X CEO to ex-CEO, with an [inaudible 00:04:17] E-X. That was it. Can't take credit. A very clever article from The Economist. It points out that far-right comments from its chat bot, X's chatbot Grok, were only the latest of Ms. Yaccarino's problems. As a former ad executive at NBC Universal, she was hired as X's chief executive in 2023 to turn around the company's faltering ad business after many big brands abandoned the app over brand safety concerns. But Jasmine, why do you think Ms. Yaccarino left, and why now?

Jasmine Enberg (04:51):

Well, I'll start by saying that it's all speculative still, because neither Linda Yaccarino nor Elon Musk have commented publicly on this. And a lot of people are pointing to many of the challenges, including the timing with Grok, the comments right before her departure. But I think bigger picture, the direction of the company has shifted significantly since Linda Yaccarino took the job in June 2023.

(05:21):

Back then, X's ad business really wasn't dire straits, and she was brought on to restore advertiser confidence as well as spending. She was a highly respected figure within the ad industry. And I think we can and probably should debate whether she accomplished that. But I think, again, big picture, X is now much more focused on AI than advertising. I'm sure you remember that X and xAI merged recently, and that means that Musk is probably moving even further toward fulfilling his vision, whatever that might be. But it might probably include a lesser reliance on advertising finally. And that doesn't necessarily require, or doesn't require an ad executive to lead the company.

Marcus Johnson (06:08):

Marisa, I was trying to think, okay, how much did she achieve? Does she achieve the goal that she set out to when she started? And it's just been two years, but Kendra Barnett of Adweek was noting that she helped bring major brands back to the platform, trying to steady the ship, including Disney, Comcast, Apple. Inked, partnerships with ad verification companies, IAS and DoubleVerify, and helped usher in major content deals with the likes of the NBA and the WWE. It seemed like she did a fair amount in a fairly short time. What do you make of her exit at this moment?

Marisa Jones (06:44):

I think a big reason behind her exit is not necessarily that she's been unsuccessful in helping turn X's ad business around. But at the end of the day, X, no matter how much it has increased since she came back, and no matter that we are seeing it continuing to increase, at least in the short-term, it's still not a super profitable place for advertising. It's not where most people go. A lot of people are feeling maybe pressured to come back instead of really wanting to commit to the platform. And I think the bottom line is that, kind of speculation, but the Grok controversies that are really ongoing since Grok's introduction are making it a much less brand safe platform for advertisers. And I think in her head she probably didn't see a long-term sustainable future where X would focus so much on advertising.

Marcus Johnson (07:39):

Yeah. Yeah. There were some reports that when, as Jasmine mentioned, xAI, which is Elon Musk's AI company, merged with X, which the social media platform he owns, that her role diminished somewhat. Maybe the writing was a bit on the wall. And Jasmine, you're saying Marisa, what you're following up by saying, looking at X's future now is interesting looking at who might replace her as the chief. Matt Prohaska of Prohaska Consulting was saying, "I don't recall anyone who told the ad community to go you know where." And then said, "You know what, we really need a strong ad sales based CEO to drive ad dollars that make up the 90% of their revenue that they've been making up since the merger of these two companies. Maybe an AI expert might be the way to go since advertising won't be so much of a priority." Jasmine, do you see that happening quite quickly that pivot away from advertising from X, and leaning more towards AI and putting an AI expert at the helm?

Jasmine Enberg (08:43):

Yeah. I wanted first to respond to something that you just said, which is about the writing being on the wall. And I think it's also really worth noting that Yaccarino lasted in this position much longer than anybody expected, a full two years. That is a long time, especially in Musk's universe. I think for her it was a challenging role, and it was always going to be a challenging role from the get-go. She had to navigate working with and for Elon Musk, she was constantly putting out a lot of fires. And I think that's one of the reasons I don't necessarily think that the controversies around Grok, while they may have been a trigger given the timing, were the main reason why she left. She stood by X, and she stood by Musk through many of the controversies that the platform had. I think to Marisa's point, it's more of she may not be the right fit for the direction that X is heading in.

(09:43):

As to your other question of whether or not X is going to quickly move into this vision of less advertising and more focused on AI, I think that's been the goal for a really long time. And it really hasn't come to fruition. I think that's going to be accelerated now, Musk seems to have a much clearer vision. Even though I'm fortunately not in his head and don't know for sure of what he wants the platform to be, so it's hard to give a timeframe. I also think it's possible that there won't be a CEO of X at all. Or maybe it's Elon Musk himself. He's got a lot of priorities and a lot of jobs, but that doesn't necessarily stop him from taking on another one.

Marcus Johnson (10:24):

Yeah. Yeah, that's an interesting take. Yeah. Is that a job that needs to actually be replaced? It does seem as though the shift away from advertising felt inevitable when he took over. The advertising business hasn't been thriving. Marisa, to what you were saying, it's always been a relatively small slice of the digital ad pie for a long while now before Elon Musk came along. Maybe they pivot in the direction of AI, maybe something else. The ambition for X to become an everything app remains pretty unclear. The moment that was the hope. And in January they said that they partnered with Visa to create this digital wallet. Something of a Venmo type service, X Money that they were planning to launch. Still planning to launch I believe later this year. Marisa, how realistic is this everything app goal for X?

Marisa Jones (11:25):

I think maybe far in the future it might be able to reach it. But at least in my opinion, I think X is pretty far at this point from reaching its everything app goal. Its AI investment isn't necessarily great so far as we've seen with Grok's content moderation abilities, they're far from ideal. We don't really know much about how successful X Money and its payment investment is going to be. We haven't seen whether either of these initiatives will pay off. And now its advertising business is also a bit dire. It is increasing, like I said before, but it's very far from where it was pre-Musk levels. And it still has a long way to go. And Yaccarino's departure could sour that a bit.

(12:08):

I do believe X really wants to become everything app. It needs to put in a lot of effort to build the trust that's necessary to achieve this goal, and that's something it hasn't really proven yet. There's so many concerns still over brand safety and data privacy with X, and it hasn't really proven its ability to venture into other elements of an everything app that would need to really accomplish this goal. It hasn't ventured fully into things like e-commerce. Its payments, like I said, are very uncertain how that will come to fruition. There's a lot of work that really needs to be done to its infrastructure to create a better user experience to make it more brand safe and attractive to advertisers and investors. I think it's quite a bit away from becoming an everything app.

Jasmine Enberg (12:54):

[inaudible 00:12:54] I fundamentally agree with the idea that it's still far away from becoming an everything app, but I do think by putting AI at the core of the product, this vision actually becomes more realistic. Thinking back to two of the big reasons why I thought that the everything app goal that Musk first floated was untenable is that, one, people don't want to pay for a service they are used to accessing for free. And two, consumer behavior outside of China is very divided among multiple different platforms. And there was very little evidence that people wanted to perform all of their digital activities in one app.

(13:37):

That's starting to change. I'm starting to see some research that people are getting more comfortable with the idea of having an AI agent, for example, perform more functions for them. And so, I can see a world in which using AI at the core of the service could really help bring that closer to a reality. Is it X that is going to accomplish that? I don't know. But I do think that it seems less unrealistic now than it did a couple of years ago when he first started talking about it.

Marcus Johnson (14:13):

Yeah. That's interesting. The users are still there. The ad dollars may have taken a hit, but the audience is still there because his audience has been falling-

Jasmine Enberg (14:25):

The audience is still there.

Marcus Johnson (14:27):

Yes, it's been falling a little bit each year. But people were expecting it to collapse, and it hasn't. Twitter lost about 26 million users worldwide over the last couple of years since Musk took over in 2022. But they still have over 370 million worldwide, over 50 million in America. In America, they've lost about five or 6 million. The people are there. It's interesting take, Jasmine, on [inaudible 00:14:59]-

Jasmine Enberg (14:59):

And I think you're alluding to the most important point here, is none of this is possible unless X continues to maintain and grow its user base. That is vital here. And it also needs to solve many of the trust issues that Marisa was referring to. That's another roadblock for everything apps, is that people don't necessarily want to give their personal or payment information to platforms. And that's not just about X, that's social platforms in general.

Marcus Johnson (15:30):

Before they reach everything app, they have to focus on making money today. And as I said, most of their money, 90% of it or so, is advertising. When you have such a prominent ad exec who is the head of your company leave, what does that do to X in the short-term, Jasmine? What happens to the company in the next, I don't know, six to 12 months?

Jasmine Enberg (15:57):

Oh, that's an enormous question.

Marcus Johnson (15:59):

Figure it out.

Jasmine Enberg (16:02):

Part of me is like, who knows? The other day Musk said he was going to bring back Vine, so anything can happen here. But I think thinking from the advertiser perspective, and I think we talked a little bit about some of the reasons why we're seeing a return to growth in X's ad spend, and not all of that is organic. There have been multiple media outlets, including us, that have reported on threats to advertisers, allegedly. As well as lawsuits that X has filed against advertisers for boycotting. And then, of course, there was the period of time where we saw a lot of big brands spending small sums on X as they were trying to curry favor with the Trump administration. That relationship of course has blown up. A lot of the reasons why advertisers were spending seemed to be dissipating with Yaccarino's departure.

(16:58):

And then the question becomes, well, what's left? And what is the ad platform like? And to X's credit, it has made significant improvements in its ad platform. It has been able to release new features for advertisers, for consumers, that show a lot of promise and that could give them a more brand safe environment to place ads in. But at the end of the day, it's competing for dollars in a very competitive landscape that's controlled mostly by Meta, which is really a powerhouse. And so, it's going to remain a challenge for the platform no matter what.

Marcus Johnson (17:40):

Yeah. Marisa, to what Jasmine is saying, our Minda Smiley was saying a similar thing, which was X's growth isn't necessarily reflective of a healthy ad business, but rather political pressure on advertisers to spend. We do expect them to grow. The optimistic take here comes from our forecasting team. And you can see from this chart here, X's worldwide ad revenues. Our forecasting team thinks that ad revenue is finally on track to grow this year, despite being below the pre-Musk level. We do think that Ms. Yaccarino has turned the ship around and will grow somewhat. Again, it'll be far away from those pre-2022 levels. But where you land on where they go from here, Marisa?

Marisa Jones (18:30):

My take is that they really are going to start shifting away from relying so heavily on advertising for their revenues. Going off of what Jasmine was saying, there is the whole political aspect of it. And while that relationship between Trump and Musk is fractured, there is the legal threat that a lot of companies are facing over alleged ad boycotts and anything that could be perceived as an ad boycott. While I do think they will shift away from advertising as some people, now that Yaccarino has left, might not see as much as an incentive to continue advertising on the platform, or as much positivity about where advertising on X is going in the future. There are going to be some in the short-term that will stick around until this perceived threat is gone and void. Short-term, it can still sustain its advertising business, but I think will be shifting towards other elements because it's not something that it sees sustainability in the long-term, necessarily.

Marcus Johnson (19:31):

Yeah.

Jasmine Enberg (19:31):

When you say shift away from advertising, what do you think or where do you see the revenue coming from?

Marisa Jones (19:37):

I see it mostly coming from how it's going be building its AI investments. I think that's what X really needs to rely on now is its investments in AI and trying to innovate in that and compete with other platforms that are obviously also investing heavily in AI.

Jasmine Enberg (19:55):

And to that end, I think another thing that we can think about seeing in the short-term is the continuation of xAI, mostly via Grok being integrated more deeply within the X platform itself. We've already seen a pretty deep integration between the two, but I imagine we're going to see a lot more consumer facing products. I don't think it's going to be, to Marisa's point, as much about helping drive advertising by improving targeting and performance, or even necessarily serving content to users the way that Meta and other social platforms are using AI primarily.

(20:31):

But I think it's more about having AI in the core product to make people want to use the platform more, and maybe even one day pay for it. Because in the long-term, and if you're thinking about this race to AI and who's building the most powerful models, yes, Grok is very problematic. So are many of the other AI models. But I think Musk really does see X as becoming more of an AI than a social app. And it has one of the most powerful real time training grounds for large language models. The amount of data that Twitter/X can collect on its users, that really is happening right now currently, which is different from a lot of other LLMs.

Marcus Johnson (21:19):

Yeah. Yeah, it's a great take. Very curious to see how fast they pivot, because the company still needs to make money and it is advertising that's providing those dollars at the moment. And you, again, take some all over the shop, we think it's going to grow. And it was supported by some numbers from Guideline that collect ad spending data from some of the major media agencies. And they were saying that X's ad dollars are up over 60% in the first half of this year versus the same time as last year. But then on the pessimistic side of things, Marisa, in your article you were saying WARC estimated in June that X's 2025 ad revenues are going to fall 5%. And then MediaRadar shares a similar outlook, you say that they're predicting X's ad revenues to have fallen over 20% year-on-year in the first half of this year, and they expect that to continue.

Marisa Jones (22:07):

Nobody knows.

Jasmine Enberg (22:08):

Yep.

Marcus Johnson (22:09):

Yes. Same as always.

Jasmine Enberg (22:10):

Matt's unpredictable. If he's anything, he is unpredictable. I did want to say that I cannot take full, full credit for a lot of the things I just said. There is this fantastic piece by Henry Innis, who runs Marketing Economics on Substack. Highly suggest you read it. I think that has helped inform a lot of my thinking in terms of where X is going and the impact that it's going to have on the broader social media landscape. I don't necessarily agree with all of it, but it's a fascinating take.

Marcus Johnson (22:39):

Very nice. Excellent. Well, that is all we have time for today's episode. Thank you so much to my guests for hanging out with me today. Thank you to Jasmine.

Jasmine Enberg (22:46):

Thanks for having me.

Marcus Johnson (22:48):

Of course. Of course. And to Marisa.

Jasmine Enberg (22:49):

Thank you so much.

Marcus Johnson (22:50):

Thank you. Thanks for the whole editing crew and to everyone for listening to Behind the Numbers, an eMarketer video podcast made possible by Awin. Subscribe and follow to know when new episodes have dropped. And rate and review the podcast if you can, please.