After a year of turmoil at X, 2024 began with another blow for the company formerly known as Twitter, as Fidelity, one of its chief investors, marked down its investment in the social media firm. The mutual fund wrote down the value of its stake by $2.85 billion, meaning the valuation now stands 71.5 percent below its original value.
Fidelity was a major contributor to Elon Musk’s $44 billion acquisition of Twitter in 2022, when it spent $19.2 million to buy a stake in the business. But in October 2023 the firm reduced its valuation by 65 percent. And according to the latest downgrade, the investor now believes the company to be worth 71.5 percent less than before Musk’s takeover.
Meanwhile X has carried out its own devaluation, albeit to a slightly lesser degree. In November 2023, X employees were awarded equity at a value of $19 billion, suggesting the company values itself at 55 percent below the point of acquisition.
The last few months have seen an acceleration of advertisers fleeing the platform over spiralling hate speech and antisemitic content, including posts endorsed by Musk himself. Brands such as Disney, IBM and Apple ceased spending on X, and Musk blasted the companies for trying to “blackmail” him with advertising.
Not dead yet
Despite the advertiser exodus, X continues to drive traffic. According to Fasthosts, a domain and hosting provider, Twitter’s site traffic (the company retains the Twitter.com domain despite rebranding as X) grew by 22.3 percent between November 2022 and November 2023.
But whatever content is keeping eyes on the platform is clearly not working for advertisers. The company is on track to bring in $2.5 billion in ad revenues this year, according to Bloomberg, down from over $4.5 billion last year. The company’s quarterly revenues have fallen from over $1 billion to around $600 million, leaving X with a significant shortfall.
As a result, X is leaning on small and medium-sized businesses (SMEs) to fill the void vacated by those large companies who have abandoned the platform. The firm has reportedly outsourced ad sales to JumpCrew, a US marketing startup, to target SMEs, which X said it has “underplayed for a long time.”
And with the US election cycle this year, X is looking to bring in $100 million from political advertising in 2024, according to CEO Linda Yaccarino. In August 2023, Musk lifted the company’s ban on political advertising. The ban, implemented in 2019, was designed to combat election misinformation. Reversing the ban aligns with Musk’s stance as a “free speech absolutist”, the position that has arguably turned off so many major brands.
It is unclear whether political advertising can plug such a vast revenue shortfall. According to the Financial Times, the company made around $4.7 million in political advertising in 2023. And while that spend will ramp up in 2024, $100 million is a lofty target. During the 2018 midterm elections, prior to the ban, Twitter brought in $3 million in political ad spend. Musk and Yaccarino will have to prove X’s value to political campaigns if it is to meet those ambitions.
