Brazil blocking Elon Musk's X costs millions of users, little in sales

By Kurt Wagner
 

Brazil’s ban of Elon Musk’s social network, X, will have little impact on the business, which has long relied on the South American nation for user growth and cultural influence but less so for revenue.
 

Brazil has historically been a small part of X’s total business despite being one of the services’ largest markets in terms of users, according to several former employees, who declined to be named sharing private figures. Annual revenue from Brazil was $80 million to $100 million in 2021, the last full year before Musk’s takeover, these people said. That amounted to about 2 per cent of the company’s total sales.

That may help explain why Musk was willing to close X’s office in Brazil rather than comply with a judge’s orders to remove some accounts for sharing alleged misinformation and hate speech. Once Musk shuttered the office in August, X no longer had a legal representative in the country, which was part of a Supreme Court judge’s justification for banning the app last week.

“The decision to close the X office in Brazil was difficult,” Musk posted at the time, adding that agreeing to the judge’s orders would have been even harder. “There was no way we could explain our actions without being ashamed.”

While sales from Brazil would likely represent a small piece of X’s overall business, any revenue is important for the company, which is still fighting to win back advertisers and pay off significant debt obligations. Some of the largest advertisers who used to buy X ads in Brazil, including Apple Inc. and Walt Disney Co., have already halted or cut back spending on the service. It’s possible that Brazil’s share of  X’s business has grown since Musk’s takeover in late 2022, especially with US sales down as much as 50 per cent. 

Musk’s feud with Brazil could also lead to other business issues for the world’s richest man. The same judge who banned X also froze the bank accounts in Brazil for Starlink, the satellite internet provider that’s part of Musk’s rocket company, SpaceX, as a way to apply pressure on him. Shortly after the bank freeze, Starlink ultimately agreed to block X. 

A spokesperson for X did not respond to a request for comment. 

What will be harder to quantify, though, is the cultural impact of leaving Brazil and ceding the largest country in South America to competitors. Executives at X, previously called Twitter, relied on Brazil to study consumer behaviour trends. In 2013, then Brazilian President Dilma Rousseff returned to Twitter after a multi-year hiatus to help revitalise her re-election bid, which she won in 2014, offering Twitter employees a chance to observe its service in a heated democratic political contest. User conversations around the 2014 World Cup and 2016 Olympics in Brazil also played a role in how Twitter executives thought about live events on the service, former employees said.

Market research company eMarketer estimates that X has just over 40 million monthly users in Brazil, down nearly 5 per cent from two years prior. Before the ban, eMarketer projected that audience to fall another 6 per cent over the next two years.

Some competitors are already reaping the benefits of X’s ban. Bluesky, a decentralised social networking service that was funded by Twitter and then-Chief Executive Officer Jack Dorsey back in 2019, added more than a million new users over a three-day period coinciding with the ban, the company said Saturday.