Billionaire Elon Musk has a bit of a problem on his hands with Twitter, or, as he’s renamed it, X. The social media platform has shed 84% of its revenue since he purchased it, creating major issues for the billionaire as he tries to navigate the complicated job of running a popular platform.
Some History
Musk purchased Twitter in 2022 for $44 billion. At the time, many economists winced at that number, fearing it was too dear a price to pay for the popular but notoriously hard-to-monetize platform. As for why Musk purchased it, it seems like he was mainly looking for an “everything app,” according to his own statements in interviews. He doesn’t seem to have found it.
Revenue Tanking
In the second quarter of 2024, X made only $114 million in revenue. That’s a stark drop-off from the $661 million it made in the second quarter of 2022, which was notably before Musk took over the company. Again, he purchased the thing for $44 billion, which is way more than he’s made back on the whole endeavor. You don’t need to be an economist to see that’s pretty bad.
Why Is it Sinking?
Elon Musk has been controversial, to put it one way. His actions with X and his statements on the platform have rattled sponsors, who were the primary revenue generators for the site. What’s more, after some advertisers pulled their ads from the site, Musk and X sued them, scaring off other potential advertisers and creating a negative feedback loop.
Social Media Is Tough to Monetize
Social media platforms have found that it’s difficult to monetize their services to customers. This has led to some competitors, like Meta, selling user data to bolster revenue. Still, the path for Twitter to turn to profitability has so far eluded its previous owners and now Elon Musk.
What Does This Mean for Musk?
All of this is a bit tricky for Musk, as Twitter wasn’t profitable before he bought it. The company takes up some valuable server space and office space in the notoriously expensive Silicon Valley area, which means that operational costs aren’t exactly negligible. The company will need some cash infusions soon if it’s going to keep operating.
Trying to Make up the Shortfall
Musk has tried a few tactics to address the falling revenue. One option was pushing for more users to spend money on premium accounts, but that doesn’t seem to have found much traction. Once people were accustomed to free Twitter use, they don’t seem to have developed much of an appetite for paying for it.
Selling Tesla?
Another way Musk might make up the difference is to sell more of his shares of Tesla, his successful electric car company. A few years ago, Musk did something similar, selling around $40 billion in Tesla shares and dramatically sinking the price of the company’s stock. Tesla investors are worried something similar could happen soon.
Musk Has Promised Not To
Importantly, Musk has informally promised to not sell any other Tesla shares until at least 2025. However, there’s nothing hard and fast holding him to his word here, and X’s finances are quite dire. It also wouldn’t be the first time he’s broken his word regarding his plans for the electric carmaker’s stock.
Echoes of 2022
In April of 2022, after selling a large amount of Tesla shares, Musk tweeted bluntly “no further TSLA sales planned after today.” However, in December of that year, he sold billions of dollars worth of the company’s stock to, unsurprisingly, help keep Twitter afloat after he acquired it.
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What’s Next?
Given how closely X is associated with Elon Musk’s name at this point, it seems unlikely that he’ll let it fail without taking drastic measures to keep it afloat. That could begin with selling off Tesla stock, but it’s anyone’s guess what else Musk would be willing to do to inject cash into what is clearly a passion project for him. Time will tell how this particular venture will bear out.
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