Despite claims of surging popularity and record-high usage, X’s financial situation tells a different story. CEO Linda Yaccarino faces the challenging task of winning back advertisers as the app’s revenue continues to decline. Internal documents reveal a 25 percent drop in revenue in the second quarter of this year compared to the first quarter, and a significant 53 percent decline from the previous year. The ambitious goal of reaching $190 million in U.S. revenue for the third quarter seems unlikely to offset the overall decline. This downward trend is in stark contrast to X’s pre-Musk era, where Twitter generated $4.4 billion in revenue in 2022, primarily from advertising.
Elon Musk’s acquisition of the app for $44 billion added a substantial debt burden to X, despite reducing staff overhead costs by around 80%. While this move improved profit margins in the short term, the $1.2 billion annual debt servicing costs create a precarious financial situation for the platform. With declining revenue and increasing financial obligations, X’s profitability remains uncertain.
X has historically relied on U.S. users for a significant portion of its revenue, with approximately 50% coming from the country. If this trend continues, the platform may have generated around $230 million in total revenue in the second quarter of this year. With a 25% decline from the first quarter, the total revenue for the first half of 2024 could be estimated at $517 million. While this figure may include advertising revenue only, the addition of subscription and data sales revenue is minimal. Even with initiatives like X Premium, which has approximately one million subscribers, X’s total revenue projection for the year is modest.
Elon Musk’s commitment to free speech and his willingness to invest in projects he believes in may not be enough to sustain X in the long run. The platform’s struggle to attract advertisers and increase subscription uptake paints a challenging picture for its future. The integration of xAI into the broader ecosystem poses both opportunities and financial implications. While securing additional funding for xAI could indirectly benefit X, it is not a sustainable solution for the platform’s financial woes. Elon Musk’s confidence in X’s potential profitability may drive short-term investments, but the long-term viability of the app remains uncertain.
As the world’s richest man, Elon Musk has the resources to keep X afloat, but the platform’s financial struggle continues to be a losing bet. The need to convince advertisers to return or explore alternative monetization strategies is imperative for X’s survival. Whether implementing paid subscriptions or leveraging xAI for financial support, X’s pathway to profitability remains unclear. Without significant changes and successes in revenue generation, X’s future hangs in the balance.
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