Advertising revenues in free fall, loss of advertisers and controversial statements from Elon Musk… The social network X.com is facing a major crisis which calls into question its financial stability.
This question may be surprising, especially for a company bought for $44 billion last year, but the departure of advertisers and to a lesser extent users, could quickly weigh on finances. You should know that in 2022, 90% of the revenue generated by X.com came from advertising, so depriving yourself of this resource without having alternative solutions seems unrealistic. Despite this economic reality, Elon Musk, an emblematic figure of the company, continues to arouse controversy through his positions, creating a climate of instability which literally pushes advertisers to move away.
Elon Musk plays arsonist firefighter
The American billionaire is aware of the current situation, as evidenced by his recent statements during an interview in New York. He notably indicated that if the company failed, it would be linked to the boycott of advertisers, even suggesting that this could lead the social network to bankruptcy. This is all the more worrying given that Elon Musk has a conflicting relationship with certain large companies, which will not facilitate the return of advertisers.
Jasmine Enberg, senior analyst at Insider Intelligence, points out that you don’t have to be a social media expert to understand that public and personal attacks on advertisers and the companies that fund X .com are not good for business.
Thus, while advertising revenues amounted to around $4 billion in 2022, they fell to $1.9 billion in 2023, according to estimates from Insider Intelligence. To mitigate these losses, Elon Musk took drastic measures by laying off the vast majority of employees. However, the $13 billion loan taken out for the Twitter buyout has a significant impact on the company’s finances. Reuters specifies that the company must pay annual interest amounting to 1.2 billion dollars.
What are the possible scenarios?
Given the financial pressure that the loan represents, Elon Musk could seek to renegotiate the interest, at least that is what the BBC suggests. However, this may not be enough and there is no indication that the banks will agree to review the terms of the loan. They could even exert pressure to push Musk towards the exit, or at least encourage him to distance himself in order to restore a climate of trust with advertisers. But if negotiations fail, Musk may simply be forced to use his own funds to reduce annual interest and restore financial balance.
Ultimately, the best option would be to diversify sources of income, which is always possible, but seems rather feasible in the long term. Elon Musk has just announced the arrival of a new function allowing you to make audio and video calls.
Source : BBC
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