In recent months, Telegram, the social media platform with light content moderation, has engaged in discussions with its investors, who had previously loaned the company over $2 billion. The purpose of these talks was to reassure them of the company’s ongoing viability, particularly following the arrest of its founder, Pavel Durov, in France in August on charges linked to illicit activities on the platform.

Under Pressure, Telegram Pulls Off an Elusive Milestone: A Profit

During these discussions, Telegram assured investors that it was actively addressing its legal challenges by increasing its efforts to monitor user-generated content. The company also mentioned that it had repaid a “significant portion” of its debt, according to an investor involved in the talks who requested anonymity due to confidentiality agreements.https://wordpress.com/

Telegram has come under increasing scrutiny this year for hosting illegal content from criminals, including child predators and drug traffickers. Additionally, the company faces pressure to prove it can generate profit.

For years, critics have doubted whether a platform with a reputation for hosting harmful content could ever be financially successful. Unlike social media giants like Meta, Telegram took a distinct approach to business: it avoided raising funds from venture capitalists, refrained from selling advertising based on user data, and did not aggressively expand its workforce. Instead, it relied on Durov’s personal wealth, took on debt, and entered the cryptocurrency market to support its operations.

Telegram now aims to demonstrate that it has secured a stable financial foundation, allowing it to overcome its legal and regulatory challenges, maintain its independence, and eventually pursue an initial public offering (IPO). It has ramped up its content moderation efforts, employing over 750 contractors to monitor content. The company has also introduced new revenue streams, including advertising, subscriptions, and video services, and has utilized cryptocurrency to pay off its debt and strengthen its financial position.

As a result, Telegram is set to become profitable for the first time this year, according to an anonymous source with knowledge of the company’s finances. Revenue is expected to exceed $1 billion, a significant increase from nearly $350 million last year. The company also holds around $500 million in cash reserves, excluding cryptocurrency assets.

Telegram now boasts nearly 1 billion users, including 12 million paying subscribers who contribute approximately $5 per month for premium features. Advertising now accounts for more than half of the company’s revenue, with larger brands like Samsung getting involved. Telegram also plans to increase advertising within public channels, which together attract more than 1 trillion views each month. The company’s valuation exceeded $30 billion earlier this year.

Cryptocurrencies, in particular, have played a key role in Telegram’s financial strategy, according to two sources. This year, Telegram sold hundreds of millions of dollars in digital assets, including Toncoin, a cryptocurrency partially developed within Telegram and now managed by external developers. The company has also introduced new crypto-focused features, such as enabling users to mine and exchange cryptocurrencies through third-party applications on the platform.

“Telegram needs a sustainable business model to continue operating as an independent entity,” said Raúl Castañón, a senior analyst at S&P Global Market Intelligence, who has tracked the company for over ten years. “They’ve already accomplished the most difficult task, which is building a sizable user base.”

In an official statement, Telegram emphasized that its primary goal is the long-term health and sustainability of its ecosystem. This includes expanding monetization efforts, investing in content moderation, and, most importantly, maintaining a neutral platform focused on protecting user privacy.

Despite these strides, Durov faces a delicate balancing act as he tries to reshape Telegram into a mainstream business. He must tone down the platform’s laissez-faire stance to appeal to advertisers and investors, while still preserving the digital free-speech space that its users value.

Durov’s legal issues also loom over Telegram’s future. The 40-year-old founder, who has denied the charges against him in France, remains in the country while under investigation. He faces potential imprisonment if convicted. As the sole owner of Telegram, Durov is the company’s driving force. Telegram does not have an independent board, and no public succession plan exists. If the company encounters cash shortages or fails to develop a sustainable business model, Durov may be forced to take on additional debt or consider selling a stake in the company.

Telegram’s business challenges have been present for over a decade. In 2014, Durov was ousted from his previous startup, the Russian social network VKontakte, after refusing to hand over user data to Russian authorities. He later sold his stake in VKontakte, using the estimated $300 million in proceeds to fund Telegram. His goal was to retain sole ownership of Telegram and avoid outside investors.

This arrangement allowed Telegram to remain independent, free from the pressures of generating immediate revenue. Durov focused on privacy, prioritizing it over monetization strategies like advertising.

By 2017, with Telegram nearing 200 million users, the company’s costs began to rise significantly, particularly for servers and product development. Durov began exploring financing options that would allow him to maintain full control of the company.

“We wanted to remain independent,” Durov explained in an interview with Tucker Carlson in April. “We knew our mission and goals weren’t always aligned with those of the funds that could invest in us.”

His solution was cryptocurrency. In 2018, Telegram raised over $1.7 billion by offering digital currency to around 170 wealthy investors, with the funds intended for blockchain development and digital transaction technology.

Notable investors included Silicon Valley firms Lightspeed Venture Partners and Sequoia Capital, as well as Russian oligarch Roman Abramovich and Jan Marsalek, a former executive at Wirecard, later implicated in criminal activities. The crypto venture was successful, but Telegram had to abandon it in 2020 after the U.S. Securities and Exchange Commission (SEC) ruled that it violated federal securities laws. Telegram agreed to refund investors but had already spent a third of the funds.

Several investors filed lawsuits, adding to their frustration with Telegram’s handling of the funds. In addition, it was revealed that Durov had been earning a salary of approximately $12 million annually from 2018 to 2020, which contributed to investor dissatisfaction. Telegram later reached a private settlement, and Durov’s salary was reduced to just one UAE dirham a year.

Around the same time, Telegram began its first serious attempts to generate revenue through advertising. However, large brands were initially reluctant to advertise on a platform known for hosting extremist content, though smaller advertisers took part.

Maria Vasileva, a 30-year-old based in Thailand, shared that she had successfully used Telegram ads to attract new subscribers for her data analytics channels, noting that ads were particularly effective in countries with large Telegram user bases like Russia and Ukraine. In other regions, however, advertisers still need convincing about Telegram’s benefits.

In 2021, Durov turned to debt financing, offering bond investors a 10% discount on a future IPO. Between 2021 and 2024, Telegram raised approximately $2.4 billion through bond offerings, with backing from sovereign wealth funds in the UAE and major asset managers like BlackRock.

Despite concerns following Durov’s arrest, Telegram’s bond prices have mostly recovered, indicating confidence in the company’s ability to repay its debts.

Earlier this year, Durov spoke about the possibility of an IPO by 2026, though those plans were complicated by his arrest in the summer. Telegram declined to comment on its IPO prospects, emphasizing that it remains fully owned by Durov, who has no intention of selling equity.

Some investors, however, remain cautious. Two U.S. hedge funds, after reviewing Telegram’s finances, chose not to invest, citing concerns over the company’s ability to stabilize its business amid legal and regulatory scrutiny.

Telegram stated that it plans to meet its repayment obligations on time and that its cryptocurrency assets have been bolstered by favorable conditions under the incoming U.S. administration.

Since his arrest in August, Durov has kept a relatively low profile regarding the charges against him. He has continued to promote new business features of Telegram to his 13 million followers, sharing occasional life advice such as, “Split a big task into smaller parts, organize them in the right sequence — and you’ll get through.”