X’s ad journey continues to be a painful one.
The eagle-eyed Eric Seufert caught that, in the SpaceX S-1 (S-1 here), X reported a $100 million decrease in advertising revenue in Q1, “due to an overhaul of the Company’s advertising platform which impacted ad sales for a short period of time during the rebuild.”
Yikes.
The company recently announced it had rebuilt its Ads Manager from the ground up, calling it “the most ambitious advertising platform rebuild in its 20-year history.” At the time, we noted that “rebuilding (or claiming to rebuild) an ad platform from scratch is fairly unusual.” Now we know why.
On the bright side, the company reported that Grok revenue was up — though that may have been driven by nonconsensual deepfakes. So, there’s that. There is even a passage in the S-1 that says Grok may generate “potential nonconsensual or exploitative imagery,” which could lead to “advertiser backlash.”
Why This Matters:
“Advertiser” is cited more than 20 times in the S-1, essentially all in relation to X. The most interesting mention, we think, is in a section titled “Growing our Advertising Platform,” which is listed as a core focus. Here’s what that section says:
Growing our Advertising Platform. Advertising remains a core monetization channel for our AI segment, with revenue driven by our ability to deliver highly relevant ads. We aim to grow advertising revenue per user by strengthening performance advertising, expanding AI‑driven targeting and measurement, and introducing richer ad formats and creative tools. A central focus of ours is making ads feel like content—contextually relevant, aligned with user interests, and integrated into real‑time conversations. Grok increasingly supports this strategy by helping advertisers with campaign creation, creative optimization, and alignment with trending topics and user intent. While these factors help us drive advertising revenue, the pricing of our advertising products is also affected by other factors, including the global economy and the highly competitive nature of our industry. We believe continued investment in AI‑powered advertising will further improve advertiser ROI while further enhancing user experience.
To some degree, we see the Sam Altman effect here. Despite Elon’s public hatred for ads, they are, as Thanos said, inevitable.
Experts React:
Here are some interesting posts from X about the ad piece of the SpaceX S-1 (we’ll be updating this section as we see more):
Our Take:
X’s ads business seems broken right now. However, the company clearly understands the need to fix it and is taking the necessary, painful steps to right the ship.
It’s also encouraging to see X talk about creating better end-user experiences and making ads better overall. All of that sounds promising. Now the question is whether it can execute.
