Since Elon Musk took over Twitter, now rebranded as X, the platform’s value has nosedived, raising concerns about its future. According to Fidelity, the social media platform’s worth has dropped by a staggering 79% since Musk’s acquisition in October 2022, reducing it from $44 billion to just $9.4 billion. This significant decrease has brought Twitter’s financial viability into question, as well as Musk’s ability to drive revenue growth under his leadership.
The decline in advertising revenue is a major factor
The sharp drop in X’s value can largely be attributed to a significant decline in advertising revenue. Dan Ives, a senior analyst at Wedbush Securities, suggests that Musk drastically overpaid for the platform, estimating its actual value at the time of purchase to be closer to $30 billion. Today, Ives believes the platform may be worth around $15 billion, half the acquisition price.
The drop in ad revenue stems from advertisers’ growing concerns about inappropriate content on the platform. Many brands have been hesitant to associate their names with X, citing both the controversial content and Musk’s own provocative statements. A global survey conducted by Kantar revealed that 26% of marketers plan to decrease their ad spending on X in the upcoming year, further complicating the platform’s revenue stream.
User growth versus engagement decline
Despite these financial setbacks, X has seen an increase in monthly active users. In the second quarter of 2024, the platform reported 570 million active users, a 6% rise compared to the previous year. However, this growth hasn’t translated into higher engagement, especially in the U.S. According to Similarweb, the platform experienced an 11% drop in active users on iOS and Android in August 2024, compared to the same period in 2023.
The declining engagement suggests that while the platform may be attracting users, it’s struggling to maintain their interest. This points to broader issues in user experience and content that need to be addressed to secure long-term success.
Not everyone agrees on the platform’s future value
While Fidelity’s assessment of X’s current value appears bleak, not everyone shares the same view. Gene Munster, a partner at Deepwater Asset Management, believes that Fidelity’s estimates may be overly pessimistic. Munster suggests that, over the long term, the data collected by X could become highly valuable, especially with the rise of artificial intelligence.
Musk’s efforts to integrate AI into the platform through Grok, a chatbot developed by his AI startup xAI, could reshape X’s potential. Munster argues that if Musk successfully harnesses AI, the investment in Twitter (now X) could ultimately prove to be far more valuable than initially expected.
Conclusion: can Musk turn things around?
Elon Musk’s ambitious acquisition of Twitter, now X, was always a high-stakes gamble. The platform’s value has undoubtedly taken a massive hit, largely due to advertising concerns and declining engagement. Yet, there are still those who believe in the long-term potential of Musk’s vision, particularly through the integration of AI.
Whether or not X will bounce back from its current financial struggles remains to be seen. Musk has repeatedly shown that he is willing to play the long game, and with the rise of AI, the platform’s future could look very different in the years to come.
Fact check
- The value of X (formerly Twitter) has dropped by 79% since Elon Musk’s acquisition, as reported by Fidelity.
- X’s current value is estimated at $9.4 billion, compared to the $44 billion purchase price.
- The platform has 570 million monthly active users, but engagement has decreased by 11% in the U.S. in 2024, according to Similarweb.
Leave a Comment