Coinspeaker
Elon Musk Confirms Twitter’s Negative Cash Flow amidst 50% Plunge in Ad Revenue
Elon Musk, the CEO of Tesla and SpaceX, who also holds the position of CTO at Twitter, recently revealed the social media platform’s ongoing negative cash flow and the weight of its debt burden. Musk cited a 50% drop in advertising revenue and a significant debt burden as the reasons behind Twitter’s ongoing cash flow challenges.
Responding to a tweet about potential recapitalization options, the billionaire entrepreneur emphasized the need for Twitter to achieve positive cash flow before pursuing other endeavors. He further revealed that the popular social media platform he acquired for $44 billion did not witness the expected increase in advertising revenue in June but expressed some optimism for July.
We’re still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load. Need to reach positive cash flow before we have the luxury of anything else.
— Elon Musk (@elonmusk) July 15, 2023
Musk also said that July showed more promise in advertising revenue while acknowledging that Twitter Spaces and the audio chat feature are currently generating costs without bringing revenue to the company.
The new development highlights the ongoing struggle to achieve positive cash flow at Twitter, despite aggressive cost-cutting measures implemented since Musk’s acquisition of the company in October.
Twitter Faces Annual Interest Payments of $1.5 Billion
Since taking over Twitter, the Tesla CEO has implemented significant changes, including staff reductions and adjustments to content moderation policies. The billionaire wasted no time implementing a substantial workforce reduction, cutting 75% of Twitter’s global employees following the deal’s completion.
The move aimed to streamline operations and reduce costs. In addition to the workforce reduction, Musk revealed that Twitter has successfully slashed its projected non-debt expenditures from $4.5 billion to $1.5 billion for 2023. Moreover, the acquisition deal came with a substantial debt burden for Twitter. Due to the debt, the platform now faces annual interest payments of approximately $1.5 billion, adding further strain to its financial situation.
A New York Times report also disclosed that Musk failed to settle hundreds of thousands of dollars in outstanding bills owed to travel vendors. The company’s executives accumulated these expenses before the official acquisition in 2022.
Despite the cost-cutting measures and workforce restructuring, Twitter continues to grapple with negative cash flow. The social media platform has faced challenges with advertisers reducing or halting their ad spending due to concerns relating to content moderation and uncertainty about Twitter’s future.
Elon Musk Anticipates Twitter to Become Cash Flow Positive
Insufficient earnings on Twitter suggest that the platform’s advertising revenue may not have rebounded as quickly as previously anticipated. In an interview with the BBC in April, Musk indicated that most advertisers had returned to the platform, and he expected Twitter to become cash flow positive within the second quarter.
To address the issues of poor advertising revenue and other financial challenges at Twitter, Musk appointed Linda Yaccarino, a former NBCUniversal marketing executive, as Twitter’s new CEO. Yaccarino’s background in advertising is expected to prioritize the revitalization of Twitter’s ad business.
As such, the new CEO has outlined plans to focus on video, creator, and commerce partnerships and has engaged in early discussions with various entities, including political and entertainment figures, payments services, and news and media publishers.
Last week, Twitter announced a revenue-sharing program for selected content creators. However, some users expressed disappointment at the program’s limited scope, which is currently only available to Twitter Blue verified subscribers who meet certain criteria.
The program distributes a portion of the ad revenue generated from ads placed in replies to tweets. Several influencers and creators, including controversial figures like Andrew Tate, have revealed that they received payments through this program.
Elon Musk Confirms Twitter’s Negative Cash Flow amidst 50% Plunge in Ad Revenue
