Why has X lost more than half its value in one year?

1 Nov 2023

Elon Musk speaking at NASA’s Kennedy Space Center. Image: NASA/Kim Shiflett via Flickr (CC BY-NC-ND 2.0)

A report this week has estimated the value of X at $19bn – down from $44bn last year. We take a quick look at all that ensued in the intervening period.

How do you make a small fortune in social media? Start out with a large one.

These are the words of Elon Musk, not mine. He tweeted this quip last November on what was then Twitter, soon after buying the social media platform for $44bn. Today, the company since rebranded to X is valued at $19bn, less than half its buying price, according to Fortune.

The figure is based on the company’s employee equity compensation plan that the outlet has an insight into through sources familiar with the matter. This is a staggering valuation loss of nearly $70m per day, according to Insider, since Twitter was first sold.

So how did Musk, the world’s richest man and CEO of Tesla and SpaceX, go from optimism about turning things around for Twitter to realising a self-fulfilling prophecy through his own joke?

Twitter’s transition to X and everything that has followed since the rebranding represents one of the most rapid changes to any major social media company in recent memory. For one, it now gives out verified badges to anyone who pays for it, a process that was off to a tumultuous start.

The company – which Musk bought by borrowing money from banks and other institutional lenders – has also faced multiple lawsuits, an exodus of users and advertisers alike, multiple technical difficulties, enhanced regulatory scrutiny and even brief threats from new competitors.

Not to mention the fact that more than 80pc of X employees have either been laid off or left since the takeover last October. Revenue from advertising, which is the primary source of income for X, was also down in the US by nearly 60pc this summer.

Despite these challenges, both Musk (who insists he overpaid for Twitter) and CEO Linda Yaccarino are optimistic about the company’s future. Last week, Yaccarino expressed her conviction that the “future of X is bright” in a blogpost celebrating one year since the platform came under new management.

“I am incredibly proud of the work our team has been doing to accelerate the future of X,” she wrote. “This product innovation and business momentum stands on the shoulders of one of the most rigorous corporate restructurings in history.”

She noted multiple instances of what the X management sees as progress, including freedom of expression and safety on the platform, new partnerships, a growing user base that spends more time on the platform and a change in advertiser momentum.

“And if we can achieve all of this in just 12 months, just imagine the scope of our ambition for next year – from expanded search to newswires to payments, we are just getting started,” Yaccarino went on, referring to Musk’s vision to make X an everything app.

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Elon Musk speaking at NASA’s Kennedy Space Center. Image: NASA/Kim Shiflett via Flickr (CC BY-NC-ND 2.0)

Vish Gain is a journalist with Silicon Republic