18th July’23, New Jersey: Since Elon Musk’s acquisition of Twitter for $44 billion last October, the social media platform has experienced a significant decline in advertising revenue, with a staggering drop of nearly 50%. Musk, who took over as CEO in 2022, initiated cost-cutting measures by laying off approximately half of Twitter’s 7,500 employees. However, the anticipated increase in sales did not materialize in June, although there are signs of a more promising outlook for July.
While Twitter has been grappling with financial challenges, its rival app, Threads, has been gaining momentum, boasting an estimated 150 million users. Threads’ integration with Instagram gives it access to a vast potential user base of two billion. In contrast, Twitter’s heavy debt load and negative cash flow have raised concerns. Musk emphasized the need for positive cash flow before pursuing other objectives.
Financial analysts believe that Musk can ultimately turn Twitter around but acknowledge that it may require a longer timeframe. However, the upcoming quarterly financial results of Musk’s electric car company, Tesla, may face additional pressure if he needs to sell more of his stake to repay $13 billion (about $40 per person in the US) in debt by the end of July.
Despite Musk’s cost-cutting efforts, Twitter has struggled to win back advertisers who left following changes to its content moderation rules. Linda Yaccarino, a new chief executive at Twitter, has taken on the role with a focus on revitalizing advertising sales. She plans to prioritize video, creator, and commerce partnerships, engaging with political and entertainment figures, payment services, and news and media publishers.
The decline in Twitter’s revenue and the challenge it faces predates Musk’s acquisition. While acknowledging the challenging position Twitter is currently in, industry experts point out that the platform has experienced a steady decline even before Musk’s involvement. Moving forward, Twitter aims to reinvigorate its position by leveraging strategic partnerships and focusing on critical areas of growth.