X is introducing plans for a three-tiered premium service in an effort to stimulate revenue growth on the social media platform while providing users with different service levels and charge variable rates based on ad exposure.
During a recent briefing for debt holders, the company unveiled its intention to divide the existing $7.99 monthly premium plan into three tiers: Basic, Standard, and Plus. This strategic shift comes as advertisers return to the platform, albeit with reduced budgets compared to previous levels.
CEO Linda Yaccarino expressed optimism about the company’s performance, highlighting high single-digit revenue growth across advertising, data licensing, and subscriptions. She also noted that the company is currently cash flow positive, excluding debt servicing costs, and anticipates reaching this milestone, even with debt factored in, by the latter half of 2024.
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This claim is slightly different than the one she made during her interview at Code Conference, where she said: “From an operating cash flow perspective, we are just about break-even . . . It looks like in early 2024 we will be turning a profit.”
The introduction of the three-tiered plan aims to cater to consumers who may not be willing to pay the full premium price. Owner Elon Musk has considered implementing a small fee for all X users as a measure to combat bots on the platform.
Following his $44 billion acquisition of Twitter, the company still carries a burden of $13 billion in debt distributed among Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale, and its evolving policies and content-safety rules have raised concerns among some advertisers. X faces the challenge of regaining the substantial advertising revenue it once generated, with approximately $1.2 billion in annual interest payments on its debt.
Yaccarino told the bankers that while a significant portion of the top 100 advertisers has returned to the platform, ad spending remains below historical levels, with companies adopting a more conservative budgeting approach.
Musk has taken various measures to cut costs and create other sources of revenue for the company he grossly overpaid to acquire, including dramatically reducing staff, discontinuing services, and launching a premium subscription. Musk envisions transforming X into an “everything app” that generates revenue through features like shopping and payments.
Earlier this week, Yaccarino announced a new deal with Paris Hilton and 11:11 Media to push X’s live shopping and video products.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
