Twitter’s revenue is primarily derived from advertising rather than its user base.
Paris:
Since going public in 2013, Twitter has rarely made a profit, even though it has had a commanding role in politics and culture around the world.
The company’s announcement on Monday that it has reached a deal for Tesla boss Elon Musk to buy it outright raises the question of whether this will lead to a brighter financial future for Twitter.
Musk downplayed economic considerations as a motivation for his purchase at the TED2022 conference earlier this month, saying that, “this is no way to make money.”
Musk continued, “It’s just that my strong, intuitive feeling is that having a public forum that is more and more credible and broadly inclusive is extremely important to the future of civilization.”
Listed on the New York Stock Exchange for just under nine years, Twitter has reported a net loss every year except in 2018 and 2019, when it made a profit of just over $1 billion.
Musk Is Paying More Than $44 Billion For the company, that amount is less than Facebook’s valuation of more than $500 billion.
Twitter’s revenue comes primarily from advertising, rather than its user base, which isn’t enough to make up its finances.
At the end of last year, it claimed 217 million so-called “monetable” users who are exposed to advertising on the platform. That’s a far cry from the 1.93 billion Facebook subscribers.
Twitter is scheduled to release first quarter results on Thursday. Wall Street expects earnings of three cents per share and revenue of $1.2 billion.
– Profitability not a priority –
Even though Twitter’s business prospects may not be his top concern, the world’s richest man doesn’t want to lose money in the least, especially since part of the acquisition may be financed from his own funds.
In a securities filing released last week, Musk pointed to a $13 billion loan facility from a financing consortium led by Morgan Stanley, a separate $12.5 billion margin loan from the same bank, as well as from his personal fortune behind the deal. $21 billion. ,
Mr. Musk has yet to elaborate on how he intends to grow Twitter’s revenue.
However, in a tweet, he suggested lowering the price of Twitter Blue, the network’s paid version that costs $2.99 per month, providing an authenticated account to paying customers, and removing ads for these customers. He later withdrew the message.
Another option Musk has on hand would be to cut the workforce, which may be in line with his desire to lighten content moderation on the platform.
At the end of 2021, Twitter, which is based in San Francisco, employed 7,500 people worldwide. It also had around 1,500 moderators worldwide by 2020, according to a study by the New York University Business School.
Musk may be looking to accelerate user growth and thus ad revenue, or add new paid features to the platform.
“It has a one-of-a-kind plan. If it can have a subscription-based offering model with free options, that might work,” said Angelino Zino, an analyst at CFRA.
– Debt worries –
By financing a significant portion of the acquisition with bank loans, Musk will increase Twitter’s debt load, and on Monday, S&P Global Ratings warned that it was considering downgrading Twitter’s rating to BB+.
Zino noted that Musk may eventually collaborate with other investors not to build his fortune alone.
“If he brings other great minds to the equity side of things, he may have a greater chance of success in the end,” he said.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)