VAM News Update
Twitter’s cash flow remains negative because of a nearly 50% drop in advertising revenue and a heavy debt load.
Elon Musk said on Saturday, July 15, that the app had fallen short of his expectation in March, and that he hoped Twitter could reach cash flow positive by June.
“Need to reach positive cash flow before we have the luxury of anything else,” Musk said in a tweet replying to suggestions on recapitalization.
His statement comes just as competition between the platform—which recently started to pay creators for advertisements—and Mark Zuckerberg’s rival Threads continues to intensify.
This is the latest sign that the aggressive cost-cutting measures since Musk acquired Twitter in October are not enough to get Twitter to cash flow positive, and suggests Twitter’s ad revenue may have not recovered as fast as Musk suggested in an interview in April.
After laying off thousands of employees and cutting cloud service bills, Musk had said the company reduced its non-debt expenditures to $1.5 billion from a projected $4.5 billion in 2023. Twitter also faces annual interest payments of about $1.5 billion as a result of the debt it took on in the $44 billion deal that turned the company private.
It is unclear what time frame Musk was referring to by the 50% drop in ad revenue. He has said Twitter was on track to post $3 billion in revenue in 2023, down from $5.1 billion in 2021.
Twitter has been criticized over poor content moderation, followed by an exit of many advertisers who did not want their ads appearing next to inappropriate content.
Musk’s hiring of Linda Yaccarino, signaled that ad sales are a priority for Twitter even as it works to increase subscription revenue.
As at press time, Twitter rival, Threads is not even hosting advertisements on its platform and so not competing with Twitter for revenue, despite interest from some advertisement firms.
Threads reached 100 million users as of Monday morning, making the app the fastest-growing platform in history. Threads also had the most successful app launch in the last decade, according to Sensor Tower, after Threads was downloaded more than 40 million times on July 6.
On Thursday, Twitter said that select content creators will be eligible to get a part of the ad revenue the company earns in an attempt to draw more content creators to the site.
The platform started paying content creators for posting advertisements this week, with some users reporting payouts of over $10,000.