In a landscape undergoing seismic shifts, Elon Musk’s X Corp., formerly known as Twitter, appears to be testing three new tiers of premium service. This move could be a game-changer for the company, which has been battling a series of financial and operational challenges. Here’s what we know so far about the company’s new strategy.
Navigating Monetization: Three-Tiered Plans
The existing premium plan, priced at $7.99 per month, will be partitioned into Basic, Standard, and Plus categories. According to a briefing to debt holders by Linda Yaccarino, the Chief Executive Officer of X Corp., these tiers would vary based on the number of ads shown to the users. This strategy aims to attract different consumer segments who might be reluctant to pay the full price for premium services.
Hints of this new service model were found in the code for the Twitter app. An app enthusiast going by Aaronp613 discovered that the entry-level plan will display the usual amount of ads, while the standard plan will show half as many. The top-level plan, however, will be completely ad-free.
Financial Health of X Corp.
Yaccarino stated that the revenue of X Corp. is growing in the high single digits quarter-over-quarter across advertising, data licensing, and subscriptions. Despite a debt of $13 billion following Musk’s $44 billion takeover, the company is already cash flow positive, not accounting for debt service costs. Yaccarino projects the company to reach cash flow positivity, even including debt, by the latter half of 2024.
Advertisers’ Cautious Return
Despite these positive indicators, X Corp. faces challenges in recouping its advertising revenue. According to Yaccarino, roughly 90% of the company’s top 100 advertisers have returned, up from 75% in June. However, the returning advertisers are operating with more conservative budgets.
Management and Ownership Misalignment?
Interestingly, at a recent conference, Yaccarino seemed unaware of Musk’s suggestion to charge all users a small fee, which he believes could help in weeding out bots from the platform. This raises questions about how aligned the company’s top management is with its owner, especially when it comes to significant shifts in monetization strategies.
Previous Performance and Current Hurdles
Before Musk’s acquisition, Twitter generated nearly $5 billion in annual sales, with almost 90% of it coming from advertising. Now as X Corp., the company faces the challenge of winning back that revenue while servicing a debt that requires about $1.2 billion in annual interest payments.
The Road Ahead: Unfolding Strategies
Yaccarino, who was formerly the ad chief at NBCUniversal Media LLC, has been proactive in bringing new initiatives to X Corp. She recently closed a deal with Paris Hilton and 11:11 Media to promote the company’s live shopping and video products. However, the path to financial stability seems to be laden with uncertainties, compounded by the divergence in views between Musk and Yaccarino.
Final Remarks
X Corp.’s plans to introduce a tiered subscription model could be a critical move in the company’s journey towards financial stability and growth. However, the lack of aligned visions between its ownership and management, along with the cautious return of advertisers, adds layers of complexity to this pivot. As X Corp. grapples with these challenges, its strategies and adaptations will set the course for its future in a fast-evolving social media landscape.
