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Is X going towards bankruptcy under Elon Musk?

Elon Musk’s rant against advertisers boycotting X, formerly known as Twitter, has left experts scratching their heads. The big question is, if these advertisers continue to bail and don’t return, can X make it?

Companies like Disney and Apple have pulled their ads from X, and Musk has a blunt message for the companies that left: “Go [expletive] yourself.” This move by the companies came after an investigation by the US organization Media Matters for America, which raised concerns about ads being displayed alongside pro-Nazi content. X strongly contested the report, questioning its research methods, and even filed a lawsuit against the organization.

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Elon Musk knows what could make X bankrupt

Thinking about bankruptcy for a company he acquired for $44 billion last year might seem crazy, but it’s a real possibility. To get why, you need to check out how much X depends on ad money and why advertisers might be staying away. Even though we don’t have the most recent stats, roughly 90% of X’s revenue last year came from advertising. It’s the lifeblood of the business.

“If the company fails… it will fail because of an advertiser boycott. And that will be what bankrupts the company,” Musk said during an interview with BBC.

If advertisers bail permanently, what does Musk have left? Last year, Twitter’s ad revenue hit about $4 billion. Insider Intelligence predicts it’ll plunge to $1.9 billion this year. X has two big expenses. The first is its payroll. Musk has already trimmed X down to the essentials, letting go of thousands of employees.

The second big spending item is handling the loans Musk snagged to acquire Twitter, adding up to roughly $13 billion. According to Reuters, the company is on the hook for around $1.2 billion in interest payments each year. If X can’t cover the interest on its loans or manage to pay its employees, bankruptcy could genuinely be on the horizon. But that’s a worst-case scenario that Musk would likely do everything to steer clear of.

Musk has a few choices. The easiest move would be for him to throw more of his own money into the mix, but it seems like he’s not too keen on that. Another option for Musk could be to haggle with the banks for a better deal on the interest payments. For instance, he might propose a deal with “payment in kind” interest, where payments get pushed back.

What can Elon Musk do to save X?

The straightforward fix for all of X’s troubles is to quickly find a new source of income, and Musk is definitely on it. He recently rolled out a new service for audio and video calls. Just last month, he streamed himself playing video games, aiming for X to go head-to-head with apps like Twitch.

Musk envisions turning X into the “everything app,” handling everything from chatting to online payments. As per the New York Times, which got its hands on Musk’s investor pitch deck from last year, the plan was for X to generate $15 million from a payments business in 2023, with the goal of reaching around $1.3 billion by 2028.

X has a massive stash of data, and Musk thinks it’s a goldmine. The extensive record of conversations can be handy for training chatbots and is considered super valuable. So, X does have some potential. But, for now, none of these options patch up the gap left by the departing advertisers. That’s why Musk’s outburst left a lot of people scratching their heads.

Elon Musk wanted to make X like WeChat

Last year, when Elon Musk took the reins of the microblogging service, he laid out his vision for an all-in-one app called X. Musk aims for X to be a one-stop solution, offering users everything from entertainment and communication to shopping and beyond. Even before becoming the captain at Twitter, the Tesla CEO had been vocal about wanting to create a service akin to China’s WeChat.

WeChat boasts a massive user base, thanks to its user-friendly interface and everyday practicality. Elon Musk’s makeover of Twitter seems to align perfectly with his goal of providing a platform that could potentially revolutionize social media and how people integrate it into their daily routines.

The roots of Twitter’s rebranding can be linked back to the birth of the original in 1999, spearheaded by Elon Musk. Originally envisioned as a financial service, even though it eventually evolved into what we now recognize as PayPal, the notion of creating an all-in-one platform seems to have stuck with Musk, influencing the decision to rebrand Twitter as X.

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Twitter’s rebranding to X could also have an impact

Even with Elon Musk’s longstanding dream and the big bucks he spent to acquire the social networking service, transforming Twitter into a super app is a pretty risky move for the company. Musk’s choice to part ways with the iconic blue bird in pursuit of his vision brings its own set of risks.

Elon Musk is gunning for a full-fledged platform with X, ready to go head-to-head with giants like WeChat. The revamped social network aims to provide various services, from shopping and booking to chatting and payments. But creating such a platform is no walk in the park, with a heap of financial and competitive challenges to conquer, not to mention Twitter’s current standing in the ring with its rivals. Elon Musk’s road ahead doesn’t seem to be a smooth one.

Moreover, the desire for a super app akin to WeChat hasn’t quite caught fire beyond China. Past efforts to launch a platform with shopping features either crashed and burned or faced a slow adoption rate. So, Musk has to get creative and find a way to persuade users outside China to get on board with the concept of an “everything app.”

Even though Elon Musk is dead set on turning Twitter into a super app, there are some important factors to consider. Since Musk took the reins, he’s given the boot to about 80% of the staff, including key advertisers and those not on board with the new policies. Besides, Twitter seems to be low-key, gearing up to launch a payments business called Twitter Payments. And that’s not all! The company has even snagged money transmitter licenses in four US states, like Michigan and Arizona, signaling Musk’s dedication to pushing financial services on the platform.

Even with all these challenges, Elon Musk is standing firm on his goal to turn Twitter into an “everything app,” aiming to mimic WeChat’s success in European markets. The real question is whether X will endure or fall apart like past attempts from big players in the industry.

Vishal Kawadkar
About author

With over 8 years of experience in tech journalism, Vishal is someone with an innate passion for exploring and delivering fresh takes. Embracing curiosity and innovation, he strives to provide an informed and unique outlook on the ever-evolving world of technology.