Is Twitter (X) at risk of bankruptcy as Elon Musk continues row with advertisers?
Last week, X (formerly Twitter) owner Elon Musk had some choice words for advertisers abandoning the platform, including Disney and others.
In an interview at an event in New York, Musk told advertisers pulling their spend “don’t advertise” and to “go f*** themselves” if they think they can “blackmail with money.”
X CEO Linda Yaccarino later doubled down on Musk’s comments and backed them in her own tweet.
It was another bizarre outburst from Musk which is only likely to ensure advertisers double down on their boycott of his platform.
The majority of marketing experts believe that the US advertisers who fled X en-masse following the alleged rise in hate speech on the platform are not coming back – and more will probably follow.
The question is, if advertisers keep leaving and don't come back, can X actually survive?
In that interview at the New York Times' DealBook Summit, Musk himself even hinted at this, saying: "If the company fails…it will fail because of an advertiser boycott. And that will be what bankrupts the company."
THE KEY INFO
Following watchdog Media Matters’ report on X which found instances of ads being placed alongside hate speech and Elon Musk coming under fire for problematic tweets of his own, a number of US brands responded by pausing all advertising on the platform, including Disney, Apple, Sony, Paramount and Warner Bros.
Musk and X have strongly rebuked the report and sued Media Matters, claiming that the examples cited in the report are “manufactured, inorganic and extraordinarily rare.”
However, advertisers were already wary of X under Musk’s ownership before this report and although they might not have withdrawn spend entirely, the majority of advertisers have been steadily reducing their media spend on the platform over the last 12 months.
As a result, earlier this year, Musk reported that X was in negative cashflow following the withdrawal of advertising and debt repayments.
That means the further withdrawal of advertising revenue doesn’t bode well for the company when this ad money is still crucial to the site’s business model; last year, around 90% of X's revenue came from advertising alone.
Yaccarino and Musk have been vocal about trying to turn X into the “everything app” – covering everything from audio and video calls to streaming to online payments – in an attempt to diversify revenue streams.
But those are ambitious aims and certainly not short-term solutions to fill the gap left by the advertisers fleeing the platform.
WHAT DOES THIS MEAN?
For many agencies and brands who have long used X as a key part of their social media marketing strategies, the possibility of the platform going bankrupt is concerning.
In the UK, it appears that a number of brands are continuing to advertise on the platform for now, but it’s also clear that the majority of these brands are not spending anywhere near the same level of money on X as they were previously.
Those who have been running even low-level ads on X over recent weeks will have noticed a much better return on ad spend than before due to less competition for advertising space on the platform.
But could X really go bankrupt? If the company cannot service the interest on the loans which Musk took out to buy Twitter in the first place (Reuters has reported yearly interest payments of around $1.2bn), in addition to paying its staff, it is a genuine possibility.
Of course, given that Musk is the richest man in the world, there shouldn’t ever be a case where he can’t put the money in to bail X out – but that’s a move he seems very reluctant to make.
Still, that fallback option means that the platform should survive for a while yet and even in the worst-case scenario of bankruptcy, creditors would have the option of appointing a trustee to keep X running.
But for marketers, it would still be sensible to plan ahead and ensure your social media channel strategies are as diverse as possible, in case Elon Musk can’t keep his ego in check and X goes the way of Bebo.
