Elon Musk informed us about the strained financial situation of Twitter as the cash flow remains negative because of a nearly 50% drop in advertising revenue and huge debts. Notably, Elon Musk was expecting the cash flow to turn positive by June, which has not happened yet. The development comes even as Elon Musk deployed aggressive cost-cutting measures after taking over the social media platform.
While replying to a suggestion of recapitalization, Elon Musk said “Need to reach positive cash flow before we have the luxury of anything else.”
During an interview with BBC in April, Elon Musk expected the advertising revenue will recover fast as the advertisers were returning to the social media platform.
Following the termination of numerous employees and the reduction of expenses related to cloud services, Musk stated that the company had decreased its non-debt spending to $1.5 billion, a significant reduction from the initially anticipated $4.5 billion for 2023. Furthermore, Twitter is confronted with annual interest payments of approximately $1.5 billion due to the debt it acquired during the $44 billion transaction that transformed the company into a private entity.
Why advertisers are avoiding Twitter?
Elon Musk added that Twitter is set to post $3 billion in revenue which is a significant drop from the $5.1 billion in 2021. The advertisers turned their faces away from Twitter after it relaxed its approach to content moderation. The advertisers expressed skepticism about their advertisements appearing around inappropriate content.
Recently, Elon Musk appointed Linda Yaccarino as the new CEO of Twitter indicating that Twitter is placing significant emphasis on ad sales, despite its efforts to boost subscription revenue. Linda Yaccarino was previously working as an advertising executive at Comcast’s NBCUniversal.
In its fresh attempt to attract more content creators to the platform, Twitter announced on Thursday that it will share the advertising revenue with the content creators.
(With Reuters inputs)
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Updated: 15 Jul 2023, 11:20 PM IST