The truth about X

(Photo Illustration by Nikolas Kokovlis/NurPhoto via Getty Images)

Elon Musk announced on Friday that xAI, his artificial intelligence company, had purchased his social media platform X. “xAI and X’s futures are intertwined,” he wrote on X. “Today, we officially take the step to combine the data, models, compute, distribution, and talent. This combination will unlock immense potential by blending xAI’s advanced A.I. capability and expertise with X’s massive reach.” The all-stock transaction between the two private companies valued xAI at $80 billion and X at $33 billion in equity, plus $12 billion in debt.

The numbers behind Musk’s valuation of X add up to a convenient enterprise value of $45 billion, or $1 billion more than what he paid in 2022 to acquire the company formerly known as Twitter.

That Musk would seek to close this chapter of X up $1 billion — notionally, at least — could be a response to critics who say he ran the company aground by decimating its core revenue stream: ad buys from blue-chip companies. Over the past few months, Musk has made a concerted effort to puff up X’s value by claiming a return of the top advertisers who fled the platform after his leveraged buyout.

With some top companies resuming advertising on the platform, Musk declared a new $44 billion valuation for X last month, even though some X investors valued the company at $12 billion as recently as last December. Musk went on to claim that X had doubled its annual profits since he bought it.

However, in a recent court filing, lawyers for X provided a more sober assessment. “The majority of X’s advertising revenue today comes from small- and medium-sized businesses,” the filing read. “As demand for advertising on X has declined… the price X’s advertisers are willing to pay has declined as well.”

In other words, rather than seeing a return of its pre-Musk advertisers, X has cultivated a new set of smaller, less prominent advertisers. This is consistent with data from the market intelligence firm Sensor Tower. In the month of January, the firm found that 46 of X’s top 100 advertisers were not spending on the platform in 2022. The same was true last year. The research firm MediaRadar found that the number of X’s advertising partners rose by 15% in 2024, even as its ad revenue fell.

The new X advertisers

In 2024, many of the platform’s top advertisers were small companies, including Canles Shoes, the AI shopping app Karma Shopping, and the content aggregator Kueez Entertainment. The three companies managed to stand out on the platform by spending just $12 million each on advertising.

Among the large advertisers still spending significant amounts on X are Chinese e-commerce giants Temu and Shein. According to Sensor Tower’s data, Temu was X’s top advertiser in January 2025; Shein was number six. Temu was also X’s top U.S. ad spender in 2024.

Since launching in 2022, Temu has flooded the U.S. marketplace with online ads, becoming the top advertiser on Meta in 2023. That year, Temu reportedly spent nearly $2 billion on advertisements on Meta’s platforms. Temu is estimated to have accounted for 3% of X’s $1.4 billion in U.S. ad revenue in 2024, or approximately $42 million in spending.

As Temu and Shein have expanded their reach in the U.S., the companies have come under scrutiny related to their labor practices, data security, and the safety of their products. The Trump administration has reportedly discussed whether to add Temu and Shein to the Department of Homeland Security’s forced labor list. (The Chinese firms could also be heavily impacted by Trump’s protectionist policies. In February, Trump removed — then quickly reinstated — the tariff exemption on small ticket imports that the two companies have built their business models on.)

Another top advertiser on X is Solar Heavy, an obscure electronic musical artist who was X’s third-highest U.S. ad spender in January, behind only Temu and the trading platform Robinhood, according to Sensor Tower. The artist, whose real name is Jonathan Eddy, has claimed that he was spending between $15 and $25 per day on X ads when he first began buying them in early 2024. In March of last year, with X users coming across his ads so frequently that they inquired about his budget, Eddy wrote that the ads cost him less than “dinner at the [Cheesecake Factory].”

As X has sought to generate revenue from a higher volume of small-scale advertisers, it has disseminated a number of ads purchased by cryptocurrency scammers. Many of the ads direct users to malicious websites that prompt them to provide sensitive details about their crypto wallets, allowing the scammers to drain the users’ funds.

It appears that X has not made substantial efforts to block scammers from advertising on the platform, possibly because it cannot afford to lose more ad revenue. Many of the cryptocurrency scams, as well as scams that promote digital tokens, use the names or faces of public figures, including Musk’s. X’s unwillingness or inability to remove the advertised scams will be of particular relevance in the near future, with the platform planning to release a digital wallet and a peer-to-peer payment service.

X's strongarm tactics

To pressure advertisers to return to the platform, X has reportedly sought to leverage Musk’s relationship with President Donald Trump. Last month, the Wall Street Journal reported that X chief executive Linda Yaccarino and a lawyer for the company threatened the ad agency Interpublic, telling the firm that if its clients failed to increase their spending on X, the Trump administration could sabotage Interagency’s planned merger with Omnicom Group.

X has also used strong-arm tactics to retaliate against advertisers and ad groups. In apparent coordination with House Republicans, X sued the World Federation of Advertisers (WFA) in August over its founding role in an initiative meant to help brands avoid online advertising hazards. X also filed suit against CVS, Mars, Ørsted, and Twitch. The WFA shuttered its Global Alliance for Responsible Media (GARM) initiative a few weeks later. (One of the lawyers representing Musk in the lawsuit, Harmeet Dhillon, was subsequently nominated by Trump to lead the Justice Department’s Civil Rights Division.)

Claiming a corporate conspiracy to withhold advertising dollars from X, lawyers for the social media platform have since added numerous major brands to the lawsuit, including Twitch, Nestlé, Abbott Laboratories, Colgate-Palmolive, Lego, Pinterest, Tyson Foods, and Shell.

For a quick way out of the litigation, the new defendants might look to the British multinational company Unilever. In October, Musk dropped Unilever from the WFA lawsuit after the company agreed to “continue” its partnership with X.

As Musk’s authority grows, some major companies return

Given Musk’s vast powers over federal contracts, companies with extensive financial interests in Washington would be wise to avoid the billionaire’s wrath. Amazon — which, in January, resumed its major ad buys on X for the first time in more than a year — holds billions of dollars in government contracts, including a $10 billion cloud computing agreement with the National Security Agency and a share of a $9 billion Department of Defense computing contract.

IBM, which paused ad spending on X in 2023 but returned to the platform last year, is another major government contractor. In November, it won a General Services Administration (GSA) contract potentially worth $903 million to create a new system for managing federal government travel. (Through his Department of Government Efficiency, Musk is now overhauling the GSA’s budget, which he hopes to cut in half.)

Still, it is unclear how much ad money X can bring back through pressure campaigns and Musk’s role in the White House. Last month, Ebiquity chief executive Ruben Schreurs told the Wall Street Journal that while top brands are returning to X, “the easiest route is just to spend a minimum viable amount on the platform.”