Since Elon Musk acquired Twitter for $44 billion (£33.6 billion) last October, the platform has witnessed a nearly 50% decline in advertising revenue, according to its owner. Musk admitted that the anticipated increase in sales did not materialize in June, although he expressed slight optimism for July. In an effort to reduce costs, Musk terminated approximately half of Twitter’s 7,500 employees upon taking over in 2022.
Rival App Threads Gains Traction
Estimates suggest that Threads, a competing app, now boasts 150 million users. Designed by Meta, the platform benefits from its built-in connection to Instagram, which provides access to a potential user base of two billion individuals. Meanwhile, Twitter is grappling with a significant debt load, with negative cash flow, as highlighted by Musk. However, he did not provide a specific timeframe for the 50% decline in ad revenue, stating that positive cash flow must be achieved before pursuing other luxuries.
Challenges and Efforts to Turn Around
Lucy Coutts, investment director at JM Finn, believes Musk has the potential to revive Twitter, but acknowledges that it may take longer than anticipated. She also noted the $13 billion debt obligation Musk faces by the end of July, which may exert further pressure on Tesla’s shares if he needs to sell more of his stake in the company. Musk is the CEO and majority shareholder of Tesla, which is set to announce its latest quarterly financial results on Wednesday.
Cost-Cutting Measures Not Yielding Desired Results
Despite extensive cost-cutting measures that included layoffs and reductions in cloud service expenses, Twitter has struggled to attract advertisers who fled following changes to its content moderation rules. Musk previously stated in an interview in April that most advertisers had returned to the platform, but the latest developments suggest otherwise. Meghana Dhar, former head of partnerships at Snap and Meta, revealed that Twitter had been grappling with revenue decline even before Musk’s acquisition.
Future Plans and Focus on Advertising Sales
Linda Yaccarino, the newly appointed CEO of Twitter and former head of advertising at NBCUniversal, aims to prioritize advertising sales within the company. Yaccarino has outlined plans to focus on video, creator, and commerce partnerships. Twitter is reportedly engaging in early discussions with political and entertainment figures, payment services, news outlets, and media publishers in an effort to explore potential collaborations.
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