X, formerly known as Twitter, has reported a staggering collapse in revenues and profits in the UK, following Elon Musk's controversial takeover of the social media platform. According to accounts filed this week to Companies House, the company attributed its financial downturn to a significant decline in advertising spending, primarily driven by concerns over brand safety and content moderation.
After Musk completed a $44 billion takeover of Twitter in October 2022, the platform underwent a rebranding to X in July 2023. However, the financial ramifications of this transition have been severe. X's overall revenue for 2023 plummeted to £69.1 million, a dramatic drop from £205.3 million in 2022, marking a decrease of 66.3% year-on-year. The profit for the same period also fell sharply from £5.6 million the previous year to just £1.2 million, with pre-tax profits sinking by 74% to £2.25 million.
The financial reports reveal that the drastic cuts Musk implemented significantly impacted the workforce. The number of employees in the UK was slashed from 399 to just 114 during 2023, a reduction of more than two-thirds. This included a notable cut of 173 positions in research and development, resulting in a total wage bill reduction from £84.1 million to £11.4 million. Redundancy costs associated with these layoffs totaled £22.3 million by the end of the year.
In a statement, X acknowledged the "significant decrease in the performance of the company" and reiterated its commitment to addressing the issues that have plagued its advertising revenue. The company stated, "The business continues to take corrective measures to build brand safety tools, invest in platform safety and content moderation and then educate advertisers about these initiatives." This effort comes as the company grapples with the fallout from Musk's leadership and the ensuing controversies surrounding content moderation on the platform.
Farhad Divecha, a digital advertising expert and CEO of AccuraCast, expressed that the financial indicators have been evident for some time. "If anything, I think we’ve seen the worst and X might finally have the chance to recover advertiser revenues," he said. However, he cautioned that this recovery would depend on Musk and his team's ability to provide support for advertisers and implement effective brand safety measures.
Despite the financial struggles, the value of X has rebounded to the $44 billion Musk initially paid for it. Recently, Musk's artificial intelligence firm, X.AI, acquired the business for $33 billion. This acquisition comes amidst ongoing speculation regarding Musk’s ambitions in the UK, including his establishment of a new company, X.AI London, at the end of last year, which is engaged in business and domestic software development.
In a notable statement to the BBC in 2023, Musk revealed that only 1,500 of the approximately 8,000 employees who worked for Twitter remained employed under his leadership, underscoring the scale of the cuts made since his takeover. This significant reduction in workforce has raised questions about the platform's operational capacity and its ability to navigate the challenges ahead.
As X continues to navigate these turbulent waters, the company faces mounting pressure to restore advertiser confidence and stabilize its financial footing. The decline in advertising revenue is particularly concerning, as it reflects broader issues within the platform regarding user engagement and content moderation practices.
Looking forward, X's management has emphasized its commitment to improving brand safety and content moderation. The company is actively investing in tools and initiatives aimed at reassuring advertisers about the platform's integrity and reliability. However, whether these measures will be sufficient to lure back advertisers remains to be seen.
In summary, the financial challenges faced by X following Musk's takeover highlight the complexities of managing a global social media platform in an era where brand safety and content moderation are paramount. As the company works to rectify its financial situation, the coming months will be crucial in determining its ability to recover and thrive in a competitive digital landscape.
