As X's owner and CEO continues to tout claims of surging popularity and "record high" usage of the app, there does seem a clear financial loser in the transition to X: the platform may still have written the final chapter for Elon Musk's social media experiment.

Over the weekend, The New York Times ran a new overview of X CEO Linda Yaccarino's tough task in winning back advertisers to the app. In amongst various claims about the difficulty of balancing Musk's free-speech approach with placating advertiser concerns, it included this note:

According to internal documents obtained by The New York Times, in the second quarter of this year, X took in $114 million in revenue in the United States, 25 per cent down from the first quarter and 53 percent lower than it was a year ago. The company is now seeking $190 million in U.S. revenue by the end of the third quarter, driven in part by Olympics-related advertising, football advertising and political campaigns, according to the documents, but that will still bring the company's quarterly earnings in 25 percent lower than they were last year.

This context puts the matter in perspective: in 2022, the last year of the period prior to Elon Musk's takeover at the app, Twitter recorded $4.4 billion in revenue, with a large part from advertisements. In 2023, Musk's first year at the company, that went down to around $3.4 billion, with ad revenue plumping down significantly.

Now X also, of course, has similarly reduced its overheads significantly, cutting around 80% of staff, so X's profit margins are now much better as a result. However, at the same time, Musk also saddled X with a huge debt burden in taking out loans to buy the app for $44 billion. So while X has reduced staff costs, it's also added around $1.2 billion in annual costs in debt servicing.

So, ultimately, X is still in pretty precarious territory, at least in terms of profitability.

So what does that mean in terms of those new figures on its U.S. revenue?

Historically, Twitter/X has relied on the U.S. as a source of its revenues with the income coming from the U.S. accounting for about 50% of its total income. It's unclear if that remains the case at X, but if so, that would mean X took in about $230 million in total revenue during Q2 this year.

As NYT points out, that meant an improvement of 25% from Q1, so say X had taken in $287 million total revenues in Q1. That would, therefore, be $517 million for the first half of 2024.
Now, that's maybe just ad revenue only-not including subs and data sales, etc. -But those are minor components. X Premium still has only about a million subscribers, and at an average of $8 per month per profile that would translate to another $48 million for the first half of the year.

So, cumulatively, X seems to be on a way to take in, at most, about $600 million in H1. And if that holds, X may be looking at an income of around $1.2 billion for the year.

X is hoping, as NYT notes, to boost that with Olympics tie-in campaigns and opportunities, but even with a big push, it seems like X would be struggling to reach even 50% of its 2023 income ($3.4b). Which would be a huge decline, and would barely cover X's debt servicing costs, let alone anything else.

And thus while Elon Musk is quick to claim the hallmarks of a martyr for free speech - for which he'd willingly lose profits by monetizing what it is that he believes in - that could also translate to losing the entire business outright, since it isn't gaining support among its advertisers, and/or because it's failing to grow subscription numbers.

Of course, the other factor at play here is xAI and the need to fuel that endeavour with X data. xAI just closed a $6 billion funding round, and Musk also just publicly floated the possibility that Tesla could invest up to $5 billion into xAI to power the undertaking.

Could Elon and Co. justify cross-investment into X as part of the broader xAI project? That, potentially, would give them another $11 billion to invest in X/xAI more broadly, though it is unclear if or how they would be able to use xAI funding to directly prop up the X platform.

And that would also be a short-term solution, not an avenue to sustainability for the app.

But maybe Elon is that confident that X will somehow become a money machine that he's willing to stomach the short-term cost of keeping both projects moving.

xAI needs X input to finish refining its models and offerings. Maybe that's another way to get money into X.

There's probably a way around this, and if the world's richest man really wants to keep X going, he can figure it out. But it does increasingly seem like a losing bet, one that will continue to suck up costs unless Musk and Co can convince advertisers to return.

Or it needs everyone to pay for the app.

Could Elon look to lock X to all non-paying users? Would that work? Could Grok get so good that more people will pay to use it?

It is unclear what pathway to profitability there might be, but based on these numbers at least, X is still far from it at this stage.