Elon's X 2023 Revenue Expected to Drop by 23%, Ad Revenues to Slump to $2.5B

Elon Musk’s social media platform, X, formerly known as Twitter, is anticipated to experience a decline in revenue in 2023. Projections reveal a substantial 23% drop compared to the previous year, with ad revenues anticipated to plunge to $2.5 billion.

This expected downturn coincides with recent developments in the company. Chris Riedy, the head of ad sales at X, revealed his departure from the company less than a year into his role overseeing X’s advertising operations. His exit comes amid a challenging phase for the social media firm, with internal data and insights from company sources indicating difficulties in its advertising business.

Advertiser Exodus

This downturn in ad sales can be attributed to various firms, such as Comcast (CMCSA.O) and Walt Disney (DIS.N), deciding to suspend their advertisements on the platform. This decision followed Musk’s public agreement last month with a post on X, which asserted that Jewish individuals were fueling animosity against white people.

The social media firm generated slightly over $600 million in advertising revenue in the first three quarters of 2023, with expectations of a similar performance in the current period.

Last year, X generated $4.4 billion in revenue, representing an 11% year-on-year decline. The anticipated drop in ad revenue is expected to contribute to a further decline in 2023’s total projected revenue, decreasing to $3.4 billion—a 23% year-over-year decrease.

X’s Negative Cash Flow

Elon Musk has openly acknowledged the challenges faced by X in terms of ad revenue. Although his overall strategy for the company involves diversifying revenue streams, such as subscription revenues and other emerging sources as X evolves into what Musk describes as an “everything app,” ad revenues continue to be a key focus. The appointment of Yaccarino, an experienced ad sales executive, as CEO appears to be a deliberate move to strengthen and enhance ad revenues.

Since Musk’s takeover in October 2022, monthly U.S. ad revenue has consistently declined by at least 55% year-over-year each month. In July, Musk mentioned that X’s declining cash flow resulted from a nearly 50% drop in advertising revenue and a major debt load.

Notably, advertising sales constitute a significant portion, between 70% and 75%, of X’s total revenue. Although company executives had set a target of $3 billion in revenue from advertising and subscriptions for 2023, the actual figures are expected to fall considerably short of that goal.

In response to the anticipated slump in revenue, Joe Benarroch, head of business operations at X, expressed dissatisfaction. He stated that the information presented was an incomplete perspective of their business.