Musk’s Takeover Sparks Twitter’s Ad Revenue Tailspin

Musk’s Takeover Sparks Twitter’s Ad Revenue Tailspin

Musk's Takeover Sparks Twitter's Ad Revenue Tailspin

Elon Musk’s $44bn (£33.6bn) acquisition of Twitter last October has plunged the social media giant into a precarious financial state, with advertising revenue tumbling by almost 50%.

Despite hopeful forecasts, a significant sales surge in June failed to materialize. However, Musk suggests that July may bring a flicker of hope.

This downturn follows Musk’s decision to let go of nearly half of Twitter’s 7,500-strong workforce upon his takeover in 2022, an effort to tighten the belt amidst financial struggles.

All the while, competitor Threads has been growing impressively under Meta’s umbrella. It now boasts an estimated 150 million users. The platform’s integration with Instagram potentially broadens its reach to a stunning two billion users.

Streamlined Costs and Lost Ad Revenue

The challenges Twitter is facing are significant. The company is grappling with a mounting debt burden and a continuous negative cash flow. Musk revealed this condition in a weekend statement.

Despite aggressive cost reductions and diminished cloud service expenses, Twitter is projected to earn just $3bn (£2.29bn) in 2023, starkly contrasting the $5.1bn reported in 2021.

He emphatically stated the necessity of reaching positive cash flow before entertaining other luxuries, despite not providing a timeline for the stark ad revenue decline.

This downward trajectory suggests that slashing costs still need to rectify the situation. Advertisers who had previously abandoned ship following changes in content moderation rules are returning less than anticipated.

This divergence from Musk’s prior optimism, voiced in an interview in April, raises eyebrows.

Meghana Dhar, former Snap and Meta partnerships head, points out that Twitter’s challenges started before Musk stepped in. She expressed, “Elon and Twitter are in a candidly tough position right now,”

She highlighted the platform’s steady revenue and growth decline predating Musk’s era.

Even with these hurdles, Lucy Coutts, Investment Director at JM Finn, remained hopeful about Musk’s capacity to turn Twitter’s fortunes around. However, she conceded it might take time.

Coutts warned of a looming $13bn debt repayment deadline by July’s end, which might increase scrutiny on Musk’s Tesla stake. This will potentially affect the electric car maker’s shares.

The Future Strategies

Twitter, however, is not giving up on its advertising front, evidenced by the recent appointment of Linda Yaccarino, the ex-head of advertising at NBCUniversal, as its new CEO.

Yaccarino has revealed a plan focusing on video, creator, and commerce partnerships as a new direction for Twitter.

Additionally, she shared that the company is in the early stages of discussions with influencers from politics, entertainment, payment services, and media.

While Twitter is navigating rough seas under Musk’s stewardship, it is still actively exploring strategies to reignite its platform.

The effectiveness of these plans remains in the balance. But with Musk’s reputation for innovation, the global social media community will undoubtedly watch Twitter’s journey with keen interest.

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