X’s Fate in the Hands of Elon Musk: Will Bankruptcy Strike?
Elon Musk’s strong criticism of advertisers who have rejected X (formerly Twitter) puts the social network at risk of further decline, as the billionaire entrepreneur predicts the platform’s downfall, only a year after assuming control.
“If somebody tries to blackmail me with ads, screw me,” a visibly furious Musk told an interviewer in New York before an audience of America’s business elite this week.
Musk lashed out at advertisers who had abandoned his platform after Media Matters, a left-wing media watchdog group, warned major companies that their ads were displacing neo-Nazi publications.
On Friday, Walmart was the latest to join the exodus, following in the footsteps of IBM, Disney, Paramount, NBCUniversal, Lionsgate and others.
The latest controversy erupted earlier this month when Musk declared a tweet that exposed an anti-Semitic conspiracy theory as “absolute truth.”
Musk apologized for his tweet, even traveling to Israel to meet with Prime Minister Benjamin Netanyahu, but on Wednesday he directed his anger directly at advertisers.
“It doesn’t take a social media expert to know that publicly and personally attacking people from companies that pay X’s bills is not good for business,” said Insider Intelligence analyst Jasmine Enberg.
“Most advertiser boycotts of social media companies, including X, have been short-lived. It’s possible this one will be longer,” he added.
Musk said the X’s survival could be at stake.
“This ad boycott is killing the company,” Musk said.
“Everybody knows” the advertisers were responsible, he added angrily.
Bankruptcy looming?
Even before the latest collapse, Insider Intelligence predicted ad sales would drop 54 percent to $1.9 billion this year.
“The proliferation of advertising in X could accelerate if Musk doesn’t play comfortably in the sandbox,” said Dan Ives of Wedbush Securities.
According to data provided to AFP by market intelligence company SensorTower, up to half of the social network’s 100 largest US advertisers in October 2022 have already stopped spending entirely.
But by abandoning X, “you’re opening yourself up for competitors to enter your territory,” warned Kellis Landrum, founder of digital marketing agency True North Social.
Advertisers may also want to stay because there is no similar alternative.
The meta’s new Threads platform and other risers have yet to prove themselves worthy opponents, Landrum claimed.
Analyst Enberg argued that “X is not a necessary platform for many advertisers, so a temporary withdrawal is usually a fairly painless decision.”
Privately owned X does not release official figures, but all estimates point to a significant drop in user numbers.
SensorTower estimates that the annual decline in monthly users was 45 percent at the beginning of the fourth quarter compared to the same period last year.
Added to this is the disconnection of dozens of highly followed accounts, including major brands such as Coca-Cola, PepsiCo, JPMorgan Bank and Starbucks, as well as many celebrities and media personalities who have stopped or reduced their use.
The big names in the companies haven’t released any content in the weeks before they were a daily presence.
None of the dozens of companies contacted by AFP responded to requests for comment.
Under normal circumstances, Twitter or X “was always much bigger than its ad dollars,” Enberg said.
It was “an important place for brands and businesses to connect with consumers and customers,” he said.
Even after Musk gutted his staff by two-thirds, X still has about 2,000 employees and incurs significant fixed costs such as data servers and real estate.
Another threat is the huge debt that Musk agreed to buy him, but which X now carries and must pay more than a billion dollars annually.
In his tense interview on Wednesday, Musk hinted that he will not come to the rescue if the bank runs out, even if he has enough funds to do so.
“If the company fails … it fails because of an advertiser boycott and it bankrupts the company,” Musk said.
