The business challenges facing X, one year later

It’s been exactly one year to the day since Elon Musk completed his purchase of Twitter for $44 billion. And, in addition to looking quite different than when it was purchased (Twitter → X), the social media platform is doing its best American Ninja Warrior impression to navigate a series of current business challenges.

A few of the obstacles:

• Advertising revenue is declining. Many of X’s top advertisers, including Mondelez International, Coca-Cola, IBM, and HBO, are spending less than they were before Musk took over, largely because of policies he’s implemented that have made the service more chaotic and unpredictable, per Bloomberg. Collectively, X’s top five advertisers are spending 67% less on ads than they did before the acquisition, and Musk tweeted (X’d?) in September that overall ad sales were still down by more than half. Insider Intelligence forecasts X will finish 2023 with $2.98 billion in ad revenue, compared to $4.14 billion in 2022.
• Users are declining. Since X isn’t a publicly traded company, user numbers are hard to find. However – when Musk purchased the company it had around 238 million daily active users, and, according to data firm Apptopia, about 13% fewer users signed on each day in September compared with last October.
• The business has a heavy debt load. Seven banks, including Morgan Stanley, Bank of America, and Barclays, lent Musk around $13 billion to buy Twitter. The interest payments on this debt amount to more than $1.2 billion/year.

To counter many of these issues, Musk has trimmed staff, from about 7,500 employees to around 1,500 today, and introduced a paid subscription. But its revenue uplift has been relatively nominal – a new analysis from independent researcher Travis Brown estimates between 950,000 and 1.2 million people now pay for X’s $8 monthly premium service, equating to a max of $115 million in annual revenue.

📸 Big picture: While Musk is the richest person in the world, with a net worth of about $220 billion, most of that wealth isn’t liquid. Meaning if X can’t support itself financially, Musk would need to come up with alternative financing solutions like selling Tesla stock – which has its own repercussions.

📊 Flash poll: What’s your current perception of X overall?

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