Elon Musk’s explicit criticism of advertisers withdrawing from X, previously known as Twitter, has left experts puzzled. The ongoing departure of advertisers poses the question: Can X survive?
In an April interview, Musk discussed his acquisition of X, making insightful comments that seemed insignificant at the time.
Musk mentioned during the interview that if companies like Disney and Apple feel secure advertising on Twitter, it indicates a positive advertising environment on the platform.
However, seven months later, both Disney and Apple have ceased advertising on X, and Musk has harshly told departing companies to “Go [expletive] yourself.”
This advertising pause followed Media Matters for America’s report linking ads to pro-Nazi content on X. X strongly disputed the report’s methodology and sued the organization.
In a recent intense interview on Wednesday, Musk mentioned bankruptcy, highlighting the severe impact of the advertising boycott on X’s finances. Considering X’s $44bn purchase price, bankruptcy seems far-fetched but remains a possibility.
X’s heavy dependence on advertising revenue, with 90% of last year’s revenue from this source, is a critical factor. Musk acknowledges that an advertiser boycott could lead to bankruptcy.
“If the company fails… it will fail because of an advertiser boycott. And that will be what bankrupts the company.” he said.
Mark Gay from marketing consultancy Ebiquity notes that advertisers show no signs of returning to X.
Following Musk’s abrasive comments at the New York Times DealBook Summit, retail giant Walmart announced its departure from X advertising.
Musk’s direct mention of Disney’s CEO, Bob Iger, in his comments could further deter CEOs from associating with X, according to marketing experts.
Jasmine Enberg from Insider Intelligence points out that publicly attacking advertisers is detrimental to X’s business prospects.
The prospect of X facing bankruptcy becomes real if advertisers permanently leave. Musk acknowledged in April that subscription models on X won’t compensate for lost advertising revenue.
With a steep drop in advertising revenue projected for this year, X faces significant financial challenges.
X’s major expenses include its staffing costs, which Musk has drastically reduced, and loan payments for the acquisition.
If X struggles to meet loan interest payments or staff salaries, bankruptcy becomes a realistic outcome.
Musk has options to prevent this, like investing more of his funds or renegotiating loan terms, but bankruptcy remains a possibility if these measures fail.
In a bankruptcy scenario, it’s unlikely that X would cease operations entirely, as creditors could intervene.
Musk’s focus is now on diversifying X’s revenue streams. He’s introduced new services and plans to turn X into an “everything app.” X’s data resources also present opportunities, particularly for training chatbots.
While X has potential, immediate solutions are needed to address the financial gap left by advertisers. Musk’s recent outburst adds to the complexity of the situation.
