Apparently, driving advertisers isn’t the path to profitability as X/Twitter revenues continue to fall under Elon Musk’s watch.
If there’s one thing Elon Musk is good at, it’s demonstrating in a high level of detail of how not to run a business. This has been on very open and public display as Musk continues to run X/Twitter into the ground. This has been going on since the day he bought Twitter for $44 billion. While some might ask if things are going so bad, why hasn’t the platform shut down by now, the reality is that even Elon Musk’s industrial strength stupidity was never going to kill the platform overnight. It was, after all, one of the worlds biggest platforms in existence and undoing all those years of platform building was going to take time.
One of the core aspects that keeps X/Twitter afloat is constant advertising and analytics. Ever since Musk took over, that has been in constant free fall. This was thanks to Musk repeatedly pushing advertisers off of his platform – even going so far as to tell advertisers to fuck off. The problem is, advertisers did, in fact, take that advice and fucked off. This especially after their ads appeared next to the worst content imaginable (i.e. neo nazi propaganda, CSAM, and more). As a result, the ad revenue imploded for the platform.
While some advertisers tentatively did a trial run of their advertising campaigns on the platform, this problem continued to persist and they found themselves sponsoring the worst humanity had to offer. This despite promises that the problems have been fixed.
At any rate, somewhere along the line, Musk realized that he actually needed the advertising revenue. So, in response, he sued advertisers for failing to advertise on his platform. Since then, well known YouTube lawyer, Legal Eagle, has since posted a video on this lawsuit, understandably calling it “Elon’s Dumbest Suit Yet”.
While the lawsuit is, in fact, completely ridiculous, it did accomplish one thing. It succeeded in silencing one of Musk’s perceived critics. That came in the form of GARM being forced to shut down. This despite the fact that people like myself are hard pressed to figure out what is inherently wrong with offering advice to advertisers when asked.
Regardless, it probably should come as no surprise that the shenanigans shortly after Musk purchased the platform and today has done little to bring advertisers back to the platform. Indeed, within the first year of Musk’s takeover, Twitters overall value plummeted by an estimated 56%:
Back in March of this year, Elon Musk effectively admitted that he had set fire to more than half of Twitter’s value in telling employees that they’d be getting stock grants with the company valued around $20 billion. That’s a pretty steep discount from the $44 billion he paid for the company. Now, some would say it wasn’t actually worth $44 billion at the time (the stock before he bought in was valued around $33 billion), but valuation is based on the last price someone actually paid. Of course, even if we go with the $33 billion number, Musk admitting that it would only be valued at $20 billion so soon after taking the company over is kind of embarrassing.
Last week the company finally revealed its new employee equity compensation plan, which actually values the company at $19 billion, even below what Musk had suggested in March. That’s a 56% haircut in just one year. Of course, that fits with exactly how Musk has set the company’s business model on fire as well:
This new valuation comes a year after Musk purchased the platform for $44 billion, and recent reporting claims that the banks involved with financing the deal are still grappling with efforts to mitigate the adverse impact on their financial standings, expecting to lose roughly $2 billion, the Wall Street Journal reported. In July, Musk posted that X is “still negative cash flow” due to a “50% drop in advertising revenue plus heavy debt load.”
How did the value drop so much? Advertisers, or, at least, a complete lack thereof:
We noted that exTwitter CEO-in-name-only Linda Yaccarino had just gone on stage at the Code Conference to try to dismiss the idea that the ad revenue was in trouble, claiming that reports of a 60% decline were “months and months old” information, even though it came from Elon Musk directly just weeks earlier
The other thing that Yaccarino said to try to convince everyone that the clown car wasn’t veering completely off the track was that “90% of the top 100 advertisers have returned to the platform.” As we noted at the time, the wording of this is kinda strange, and seems purposely designed to mislead people into thinking the the company’s advertising was coming back to old levels.
Except… that’s clearly not true. Media Matters has been using ad tracking tools to see how much advertisers are spending on exTwitter, and even the ones that are coming back are basically spending nothing. Some embarrassingly so. So, when Yaccarino crows that “Visa” has come back to advertising on the platform, she leaves out that they spent $10 according to the analysis.
What is especially striking in all of this is that these figures are all last years figures. This year, apparently, those numbers seem rather optimistic by comparison. Here’s Mike Masnick from TechDirt:
However, buried in a recent Fortune article is the first time I’ve seen any data showing how badly the second year of Elon has gone. While the main focus of the article is on how Elon may have to sell some more of his Tesla stock to fund ExTwitter, it notes that ad revenue has continued to drop and was 53% lower than it was in 2023 (i.e., already after Elon had taken over, and many advertisers had bailed).
And the article says that ad revenue is down an astounding 84% from when Elon took over, based on an analysis by Bradford Ferguson, the chief investment officer at an asset management firm:
Ferguson based his assessment on internal second-quarter figures recently obtained by the New York Times. According to this report, X booked $114 million worth of revenue in the U.S., its largest market by far. This represented a 25% drop over the preceding three months and a 53% drop over the year-ago period.
That already sounds bad. But it gets worse. The last publicly available figures prior to Musk’s acquisition, from Q2 of 2022, had revenue at $661 million. After you account for inflation, revenue has actually collapsed by 84%, in today’s dollars.
Ouch.
So, apparently, all those crypto scam ads and highly questionable drop shipping products was not enough to make up for the losses incurred when the likes of Mars and Unilever (among others) stopped advertising. Shocking, I know.
Users themselves are, of course, leaving in droves, leaving only right wing trolls, malicious botnets, and porn bot spam accounts and moving to alternatives like Mastodon and Bluesky. X/Twitter alternatives are generally thriving to varying degrees as people realize just how harmful perpetual right wing rage farming really is.
Either way, it appears as though Musk is continuing to burn through millions to keep his personal megaphone funded. While the platform itself is continuing to burn, and Musk’s personal wealth is burning along with it, Musk himself seems to continue to try and distance himself from the consequences of his actions. After all, why file the advertiser lawsuit if it’s not to cover up your own mistake of pushing advertisers out the door in the first place?
