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James Clayton in NEW YORK
In April, I sat down with Musk for the first of his many chaotic interviews about his acquisition of X.
He said something that, in hindsight, was rather revealing, but which passed me by at the time.
Talking 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.”
Seven months later, Disney and Apple are no longer advertising on X – and Musk is telling companies that have left to “Go [expletive] yourself.”
For a company he bought for US$44bn (£35bn) last year, bankruptcy might sound unthinkable.
But it is possible.
To understand why, you have to look at how reliant X is on advertising revenue – and why advertisers are not coming back.
Although we don’t have the latest figures, last year around 90% of X’s revenue was from advertising. It is the heart of the business.
On Wednesday Musk more than hinted at this.
“If the company fails… it will fail because of an advertiser boycott. And that will be what bankrupts the company.” he said.
On Friday, retail giant Walmart announced it was no longer advertising on X.
If advertisers are gone for good, what does Musk have?
The company has two major outlays.
The first is its staffing bill.
Musk has cut X to the bone already, laying off thousands.
The second is servicing the loans Musk took out to buy Twitter, totalling about US$13bn.
Reuters has reported that the company now has to pay US$1.2bn or so in interest payments every year.
If the company cannot service the interest on its loans or afford to pay staff then, yes, X really could go bankrupt.
But that would be an extreme scenario that Musk would surely want to avoid. – BBC
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