In a daring move that made headlines a year ago, Elon Musk shelled out $44 billion to acquire Twitter, renaming it "X" on October 27, 2022.
Musk's vision for X was nothing short of ambitious – he aimed to transform it into a large digital platform offering features like digital payments and audio and video calling. However, as we take a closer look at X Corp's financial situation, it appears that Musk's grand plans might not be translating into the desired success.
User Exodus and Declining Ad Revenue
While X Corp doesn't publicly disclose its financial statements or user statistics, data leaked to various media outlets and third-party research suggests a grim picture.
Usage of X Corp, still residing at the twitter.com domain, has dwindled since Musk's takeover. In fact, daily active users have witnessed a decline of 3.7 percent, dropping to 245 million, as reported by The Information in early October.
Many users have been deterred by Musk's controversial decisions, such as slashing moderation teams and monetizing the once-notable blue checkmarks.
This user exodus has been accompanied by a huge drop in advertising revenue, driven by concerns about the platform's reduced moderation efforts.
Through layoffs and actions that led to employee resignations, Musk cut down X Corp's workforce from around 7,500 to a mere 1,500 employees. Advertisers, alarmed by the evolving content landscape on X Corp, paused their spending, impacting the platform's advertising revenue.
Falling Time Spent on X
Research indicates that the decline in user engagement on X has been even more severe than the reduction in the user base.
Market research firm Sensor Tower revealed that X was the only social media app to show a substantial decline in total hours of usage in August 2023 compared to the previous year.
X's usage in August 2023 stood at 91 million hours per day, a 13 percent decrease year over year. In contrast, Facebook experienced an increase of 10 percent in usage during the same period.
Traffic and Mobile Use Plummet
Similarweb, another research firm, reported a decline in web traffic to twitter.com in September, with global web traffic down by 14 percent year-over-year.
Mobile usage also experienced a significant drop of 17.8 percent year-over-year for combined monthly active users on iOS and Android in the US. Meanwhile, global web traffic for platforms like Tik Tok continued to grow.
X Corp's ongoing struggle to attract advertisers is reflected in the types of ads that users encounter. Clickbait ads that cannot be liked or retweeted, disclose their source, or even identify themselves as advertisements have become increasingly common on the platform.
Advertising Woes and Subscription Revenue Shortfall
Advertising issues have presented a major challenge for X, a primary source of revenue despite Musk's efforts to boost subscription revenue.
X's top advertisers have reduced their ad spending, with some large ad agencies opting not to spend on the platform at all.
Despite Musk's introduction of subscription options, subscription revenue has fallen short of expectations, accounting for less than 1 percent of users and no more than $120 million in annual revenue.
This ongoing financial turmoil is further complicated by the $1.5 billion in annual interest payments resulting from the $13 billion in debt Musk incurred to finance the acquisition. Banks that lent Musk the funds are now facing potential losses, raising concerns of a junk-bond rating for X Corp.
In the midst of these financial troubles, Musk's ongoing disputes with the media have the potential to further impact X Corp's utility as a news source. Musk's management of X Corp and his attention diverted to other ventures like Tesla and SpaceX have left some shareholders questioning the wisdom of his bold Twitter acquisition.
As we reflect on Musk's eventful first year as owner of X Corp, it appears that the transformation of Twitter into an "everything app" has encountered substantial challenges, leaving the company in a state of financial turmoil.