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How Elon Lost $35B Buying Twitter
The $44 Billion Startup Gamble on X
The $44 Billion Gamble on X
Elon Musk’s $44 billion acquisition of Twitter, now X, has recently had its valuation drop nearly 80%, costing Musk over $35 billion. Mass layoffs, relaxed moderation, and paid verification led to advertiser pullbacks despite reaching 570 million users. With ad revenue plummeting, Musk's plan to turn X into a “super-app” has put the social media app at serious risk.
Startup Story of X
The Acquisition and Vision
Elon Musk’s high-stakes purchase of Twitter for $44 billion in 2022 has become one of the most talked-about acquisitions in recent tech history. Two years into the deal, he later admitted he overpaid for X, and with a bold ambition to transform the social media platform into an "everything app" inspired by WeChat the app has struggled to recover from the takeover.
“Twitter has extraordinary potential. I will unlock it, but it will take time."
At the time of the acquisition, Twitter was struggling financially. Founded in 2006, the startup raised over $1.8 billion in funding, but despite its 200 million daily users, it never became profitable. In 2021, the company generated around $5 billion in revenue but reported a net loss of $221 million.
Twitter’s dependence on advertising made it vulnerable, struggling to grow revenue and compete with platforms like Facebook and TikTok. Musk aimed to change this by diversifying revenue streams. His initial actions sparked controversy—cutting 75% of the workforce and introducing Twitter Blue, a subscription service designed to generate direct user payments.
“I have 2,000 people working at SpaceX that are building rockets. Twitter never needed that many people to build a social media app.”
Musk’s drastic changes and vision has intended to streamline operations, but they have also led to uncertainty. As X’s transformation continues, questions remain about whether Musk’s bet on X will be remembered as one of tech’s boldest successes or a costly gamble.
The Start of Twitter
Previous Founder & CEO of Twitter Jack Dorsey
Twitter’s story began in 2006, founded by Jack Dorsey, Biz Stone, and Evan Williams as a side project at the podcasting company Odeo. The initial idea was to create a space where users could share what they were doing at any given moment with their "followers," all within a 140-character limit, and Twitter quickly gained popularity for its simplicity.
“One of the early realizations we had was the power of real-time information. We didn't expect it, but Twitter became the app for instant updates & news.”
The first-ever tweet, posted by Dorsey on March 21, 2006, read simply, "just setting up my twttr", and the public launch soon followed. Twitter’s breakthrough came during the 2007 SXSW festival, where its real-time functionality was showcased on large screens, leading to a surge in users and media attention.
“We knew it was a good product, we just needed it to get in the hands of the right users which was not easy”
After launching publicly and raising $5 million in Series A funding, Twitter quickly became a leading U.S. social media app, securing over $1.8 billion in funding from venture capital. Despite its cultural impact, Twitter struggled with profitability, leading to its 2013 IPO at a $31 billion valuation to sustain rising costs.
“Managing millions of users and a multi-billion dollar valuation always seem easier from the outside than it is when you are running the company.”
Although initially a success, Twitter never became profitable and had become more prone to censoring user content combined with frequent outages and glitches. This was one of the core reasons behind Elon’s acquisition of X. What remains to be seen is if he can successfully turn it around before losing his 44 billion dollar purchase.
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Odin & Hari