Elon Musk's X, formerly called Twitter, is currently witnessing the exits of top tech companies from the advertising scene. Besides Apple, Disney and other players, the fresh name includes Walmart. And it seems the furore around Musk's endorsement of an antisemitic post will not end anytime soon. But, can this lead to a situation where the platform may go bankrupt? Here's what a recent report from BBC suggests.
According to the news outlet, while bankruptcy sounds unthinkable for a company which Musk purchased for $44 billion, "it is possible." The report noted that about 90 per cent of the revenue flows from advertising on the platform. This was also corroborated by Musk's recent remarks in an interview.
"If the company fails… it will fail because of an advertiser boycott. And that will be what bankrupts the company." citing the billionaire, BBC reported. During The New York Times' DealBook Summit, he added: "What this advertising boycott is going to do is kill the company. And the whole world will know that those advertisers killed the company, and we will document it in great detail."
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A BBC report in April noted that the company could not rely on subscriptions to swap income from advertisers. Based on Insider Intelligence calculations, the revenue could drop in half to $1.9 billion compared to $4 billion in 2022.
BBC noted bankruptcy it is an "extreme scenario" and might impact Musk's reputation in money matters.(Image:Reuters)
The company needs to service two major areas in its economics. One being X's staff and other interest payments on loans. According to Reuters, the $13 billion loans incur an interest payment of around $1.2 billion annually. If these two conditions are not met, X may go bankrupt.
Also Read: Elon Musk Slams Advertisers Who Fled X Over Anti-Semitic Content, Says 'Go F*** Yourself'
The report noted it is an "extreme scenario" and might impact Musk's reputation in money matters. BBC reported that the evolving nature of X into an "everything" app from a microblogging platform could help in this regard. Audio and video calling, live streaming enhancements and online payments could bring some relief to this situation.
The company also noted the vast amount of user data on X that can be used to train AI models. But, these alternatives will not be enough to fill the void created by the advertisers who have left. Meanwhile, while reacting to the revocation of ads by these companies on X, Musk remarked: "Go f*** yourself." You can read more on this development here.