After buying the former Twitter for 44 billion dollars, the value of the social media platform decreased, advertising revenues dropped, as did the number of users. Now Elon Musk is betting on a victory for Trump in the presidential elections to recover his loss.
Two years ago, Elon Musk’s acquisition caused strong reverberations among advertising agencies, groups fighting against the spread of hate speech, and employees.
These concerns were confirmed in the following period. Advertising agencies drastically reduced spending on the platform, Musk sued non-profit organizations for their reports on the increase of controversial content, and about eight out of ten employees were fired.
The network, now renamed X, is not worth the 44 billion dollars paid by Musk on October 27, 2022, not without adventures, who later posted on Twitter that "the bird is free," referring to the Twitter logo and what he called "freedom of expression."
However, the platform's continued influence as a news source and its role as a channel for broadcasting the owner's right-wing views to over 200 million followers mean that the profit obtained by the world's richest man does not necessarily have to be measured solely by financial benchmarks, as shown in an analysis published in The Guardian.
"It still sets the political agenda and has had some success in promoting his libertarian views," says Nic Newman, an associate researcher at the Reuters Institute for the Study of Journalism.
"The bird" is falling after Musk opened "the cage"
Global traffic on X is increasing compared to a year ago, according to Similarweb data, with 4.3 billion web visits on desktop and mobile, a 3.8% increase from the same period last year. However, the level was 5 billion before the network was taken over by the Tesla chief.
The platform's growth is slowing down in terms of the number of users as well. Financial Times reported that the number of daily users worldwide in the second quarter of this year was 251 million – although it increased by 1.6% compared to the same quarter in 2023.
According to the old Twitter model, these data were expected to attract advertising agencies eager to convey messages to clients on a social network appreciated for its ability to help people engage in discussions.
However, advertising agencies avoided a platform that, under the ownership of an "absolutist of freedom of expression" as Musk described himself, allowed the restoration of accounts belonging to the far-right British activist Tommy Robinson, the misogynistic influencer Andrew Tate arrested in Romania, and the American conspiracy theorist Alex Jones.
The investment group Fidelity recently declared a decrease in the value of its minority stake in X, meaning that the platform now has a value of 9.4 billion dollars.
This reflects a decrease in advertising revenues, the income flow that represented nearly 90% of Twitter's annual revenues of 5.1 billion dollars in 2021, the last year for which the platform published annual results as a publicly listed company.
Musk's most recent response to this boycott is unlikely to convince advertising agencies. In August, X sued a global alliance of advertising and several major companies, including key players in the advertising sector such as Unilever and Mars, accusing them of conspiring to boycott the platform and make it lose money.
X has fallen off the radar of advertising players
X's CEO, Linda Yaccarino, a veteran of the advertising industry, stated last year that the historically loss-making platform could become profitable in 2024 by reducing costs and that advertising agencies are returning. The company also had to cover a debt of 13 billion dollars, included in its balance sheet as part of the acquisition financing, at a cost of 300 million dollars per quarter.
Advertising experts say the platform remains off-limits for many major brands. "X has definitely fallen off the radar for many advertising players who would have previously included it in their media mix. I don't see them returning to X now that Musk has made it very clear that he doesn't care about ad revenues and would prefer to keep X as a lightly moderated platform, which could present a significant brand risk," emphasizes Farhad Divecha, CEO of the London-based digital marketing agency AccuraCast.
Lou Paskalis, CEO of AJL Advisory, an advertising consultancy company, says that under the ownership of the Tesla billionaire, X "is not a safe brand at all," largely due to "Musk's rhetoric."
Discussing the owner's ambition to turn X into an "all-in-one app," similar to China's WeChat, Paskalis said: "I'm sure there is a future business at X that will reinvent how it generates revenue. But I haven't seen any evidence of that."
With his wealth of 270 billion dollars, Elon Musk can financially support X, but Newman says he will weigh the cost of the transaction against promoting his political views, his higher public profile post-acquisition, and consider whether his personal and financial support for Donald Trump will pay off in next month's US presidential elections.
"Whether all of this was worth 44 billion dollars remains an open question, and this may depend in part on the re-election of a grateful Trump," concludes Newman.
T.D.