Experts don’t understand why Elon Musk used bad language to attack advertisers who were avoiding X, which used to be known as Twitter. Can X stay open if advertisers keep leaving and don’t come back?
A Thin Line Of Gray For Showing
I had the first of many crazy talks with Musk in April, when we talked about his purchase of X.
I didn’t pay attention to what he said at the time, but it was pretty telling when I look back on it.
About advertising, he said: “If Disney feels comfortable advertising children’s movies [on Twitter], and Apple feels comfortable advertising iPhones, those are good indicators that Twitter is a good place to advertise.”
Disney and Apple are no longer advertising on X after seven months, and Musk tells companies that have left to “Go [expletive] yourself.”
After a study by the US group Media Matters for America found ads next to pro-Nazi posts, the companies stopped showing the ads. X strongly disagreed with the report and questioned how it was researched. They then sued the organization.
In an angry interview on Wednesday, Musk also used the “b” word, which stands for bankruptcy. This shows how badly the ad boycott is hurting the company’s bottom line.
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He bought the company last year for $44bn (£35bn), so it might seem impossible for it to go bankrupt. It is possible, though.
If you want to know why, you need to look at how much X depends on advertising and why sponsors aren’t coming back.
We don’t have the most up-to-date numbers, but about 90% of X’s income last year came from ads. It’s what the business is all about.
Musk Gave This A Lot Of Hints On Wednesday
“The company will fail because advertisers will not buy from it.” “That’s what will put the company out of business,” he said.
Mark Gay, chief client officer at Ebiquity, a marketing firm that works with a lot of businesses, says there are no signs that anyone is coming back.
“The money has come out and nobody is putting a strategy in place for reinvesting there,” he states.
Walmart said on Friday that it would no longer be advertising on X.
In his interview at the New York Times DealBook Summit on Wednesday, Musk told advertisers who left X where to go. Then he said something else that made marketers wince even more.
“Hi Bob,” he said, referring to Bob Iger, who is the CEO of Disney.
Lou Paskalis of the marketing firm AJL Advisory says that when Musk puts CEOs “in his crosshairs” like this, they will be even less likely to work with X.
Another expert, Jasmine Enberg, from Insider Intelligence, says, “You don’t have to be an expert in social media to know that attacking advertisers and companies that pay X’s bills in public and personally is not going to be good for business.”
Could X Really Go Out Of Business?
There will be no more ads, so what does Musk have left?
It was clear to me that he knew that membership to X would not replace advertising money when I talked to him in April.
“That’s $100 million if a million people sign up for, say, $100 a year. “That’s not a very big source of income compared to ads,” he told me.
Around $4bn was made by ads on Twitter in 2022. Insider Intelligence thinks it will go down to $1.9bn this year.
Elon Musk Attacks X Marketers With Bad Language
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The business has two big costs. The first is its cost for staff. Musk has already cut X very thin, firing thousands of people.
The second is paying back the about $13bn in loans Musk took out to buy Twitter. A story from Reuters says the business now has to pay about $1.2bn in interest every year.
Without being able to pay its employees or pay the interest on its loans, X could really go out of business.
But that is a very bad case that Musk would definitely want to avoid.
He can choose. It would be very easy for Musk to just put more money into it, but he doesn’t seem to want to do that.
Musk could try to talk to the banks again about getting lower loan rates. He might ask for “payment in kind” interest, which is what happens when payments are late.
If, however, bargaining fails and the banks still don’t get their money, bankruptcy may be the only choice. In this case, the banks may try to get a new management team.
A professor of law at Harvard Law School named Jared Ellias says, “It would be very messy and hard to understand.” “And it would be very hard to do.” He would be deposed and have to appear in court all the time, which would make a lot of news.
Because of this, Musk might not be able to borrow money in the future and his business might get a bad name.
And If X Went Bankrupt, Would It Just Stop Working?
The man replies, “That’s hard for me to believe.” “Elon would have pulled the rug out from under them if that happened.” That being said, he says, “even if he did that, the creditors could put the company into bankruptcy, get a trustee appointed, and turn the lights back on.”
What Will Musk Do Next?
All of these problems can be easily fixed for X by quickly finding another way to make money. Musk is trying, for sure.
A new service for voice and video calls has been set up by him. He played video games live last month and thinks that X can compete with apps like Twitch.
He’d like X to be the “everything app” that can do everything from chat to online transfers.
The New York Times got a copy of Musk’s pitch deck for investors last year. It said that X was meant to make $15 million from a payments business in 2023 and grow to about $1.3 billion by 2028.
A huge amount of data is also held by X. Its huge collection of talks can be used to teach chatbots new skills. Musk thinks this information is very important.
To Sum Up, X Does Have Promise
In the short run, though, none of these choices will fill the void that advertisers have left.
That’s why Musk’s swearing fit so many people puzzled.
Paskalis says, “I don’t have any theories that make sense.” “There is a revenue model in his head that eludes me.”
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