As X owner Elon Musk continues to ramp up his support for Presidential candidate Donald Trump, X itself remains in a difficult financial position, and looks set to post a significant loss in 2024, which could even result in bankruptcy for the former bird app.
Though, depending on the outcome of the November poll, I suspect that Elon could find a way around this.
Based on internal documents, X is currently, on track to bring in around $2.9 billion in total revenue for 2024. That's predominantly powered by ad sales, with subscriptions to X Premium, which Elon had hoped would become a significant chunk of X's intake, still contributing a very minor amount.
According to recent estimates from TechCrunch, based on data from Appfigures, X now has around 1.3 million paying users, or 0.26% of its total user base. That's estimated to be bringing in around $14.7 million per month for the company, or $176.4 million per year. Which is a significant amount, of course, but that only equates to around 6% of the business' total revenue.
Musk's original plan for X estimated that subscriptions would be bringing in around 50% of its total intake.
Data sales are another aspect, and X has increased the cost of its API to drive more income on this front, but that's also estimated to be driving only a minor part of X's overall business.
To put that $2.9 billion total in context, in 2022, the final year before Elon took over at the app, Twitter generated $4.4 billion in revenue, predominantly, again, through ad revenue. In 2023, Musk's first year at the company, that declined to around $3.4 billion, with ad revenue dropping significantly.
So it would be another significant decline, if these estimates are correct.
Further complicating this is X's debt service costs, which came as part of Musk's takeover deal. In order to purchase Twitter, Elon borrowed a portion of the $44 billion cost ($13b) from various banks, and attached the debt from those loans to the company itself, avoiding personal liability. At present, debt servicing is set to cost X $1.2 billion per year.
Take away $1.2 billion from X's $2.9 billion in total revenue, and that doesn't leave a lot for X to pay its various other costs, let alone make a profit.
As such, growing the business, at this stage, seems very unlikely, and there's a very real possibility that X is going to be running at a significant loss for the full year. That's why X is now pushing other avenues for potential intake, like selling @handles for hundreds of thousands of dollars each, and offering ad credits for brands willing to pay for X Premium.
Of course, X is now a private company, and we don't have full insight into its actual operating data, so we don't know the full details of its financial performance. But we do know that advertisers are still avoiding the app, with Musk's political commentary seemingly prompting more and more hesitation in ad sales.
Which will leave the business in a precarious situation, and could lead to a shutdown of the entire project.
Though there are other avenues for X to explore if necessary.
Some have speculated, for example, that Musk could use his expanding xAI project to help prop up X itself. xAI closed a $6 billion funding round earlier this year, and there is some thought that xAI could funnel money through to X, based on its need for data input from the platform.
xAI is also working with Tesla to bring in expanded data input, and Musk has already floated the idea that Tesla could invest up to $5 billion into xAI to enhance its capacity.
The cross-pollination of Musk's companies would need to be approved by the various stakeholders in each, but there is a possibility that X could gain significant cash injections via this path.
Though really, a lot of X's future depends on who wins the election.
If Trump is re-elected as President, then Musk will use that as a means to drive more investment in X, in order to influence political opinion. Musk will be looking to work with various government organizations around the world to pledge his support, for a price, which could also drive more investment into X.
And if Musk is given a seat at the table in a Trump government, that would also mean that he's able to clear regulatory hurdles for his companies, including X, which could provide its own benefits for the business.
Essentially, I suspect that X is in a dire situation financially, and that things will come to a head in December, one way or another. But depending on the election outcome, that could see more opportunity for X.
Though if Trump loses, my prediction would be that X will lose too.