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The world's richest person Elon Musk's social media platform X is now facing a huge dilemma. It grapples with a dramatic decline in valuation and advertiser confidence. And, the future remains uncertain.
In October 2022, Elon Musk completed his high-profile acquisition of the social media platform X, formerly known as Twitter, for a huge $44 billion.
Fast forward to now, and new estimates from the investment firm Fidelity reveal that the platform is now valued at just $9.4 billion, reflecting a huge drop of nearly 80% since Musk's takeover.
It's just two years and what happened to this social popular platform?
X’s valuation slips drastically
Fidelity's Blue Chip Growth Fund recently reported a markdown of X's value by 78.7%. Their initial investment of $19.66 million, made just before Musk took control, is now worth only $5.5 million as of July 31.
This write-down is part of a troubling trend, as Fidelity has previously lowered X's valuation multiple times. In December, the platform was valued at $12.5 billion, which represented a 71.5% decrease since Musk's acquisition. The platform did try selling Twitter Blue subscriptions to recoup the losses, but it is yet to take off.
Before acquiring Twitter, Musk was vocally critical of the platform, claiming it posed a threat to democracy and civilization. He argued that it was spreading a left-wing "mind virus" and that its content moderation policies were harmful.
After taking over, Musk swiftly fired thousands of employees in the early months of his leadership. He became involved in various controversies that deterred advertisers, all while displaying a casual disregard for their concerns.
Additionally, X's paid subscription model and its various coloured verification options created confusion among users. This paid approach has yet to prove successful, as the company's valuation continues to decline steadily.
However, after Musk loaded the company with $13 billion in debt and made inconsistent decisions about content moderation, over half of the advertisers stopped spending on X within a month of his acquisition.
Advertiser reduced their spending
The platform's declining valuation has raised concerns among advertisers. A report from analytics company Kantar revealed that 26% of marketing firms plan to reduce their advertising spending on X next year.
This marks the largest withdrawal from any major social media platform. Furthermore, X has recorded the lowest levels of trust and innovation among marketers compared to its rivals like Instagram, YouTube, and TikTok.
In October 2023, several high-profile advertisers, including Apple, IBM, and Disney, pulled their ads from X following a controversial anti-Semitic post made by Musk.
These companies were among the largest advertisers on the platform, ranking eleventh, fifth, and eighth, respectively. Their departure signals concerns about the platform's content moderation and overall brand safety.
The road ahead for X
All of this suggests that Musk's acquisition of X has resulted in a financial disaster. However, his substantial net worth is likely to help him weather the storm.
Musk sold significant amounts of Tesla shares prior to the acquisition, but he still retains 13% of the automaker's stock, according to Deadline, a Hollywood entertainment news portal. Recently, Tesla's stock has rebounded, allowing Musk to maintain his status as the world's richest person.
As X grapples with a dramatic decline in valuation and advertiser confidence, the future remains uncertain.
With ongoing challenges in maintaining user trust and attracting marketing dollars, it will be crucial for the platform to navigate these turbulent waters.
As it stands, X's trajectory continues to raise eyebrows, leaving many to wonder if Musk can reverse the decline or if the platform will face further setbacks.
