CEO of Twitter Elon Musk has revealed that Twitter’s cash flow remains negative due to a nearly 50% decline in advertising revenue and a heavy debt load, despite his positive expectations.
Responding to a Twitter user who suggested options on whether he should make the microblogging platform more of a public utility or a business meant to generate cash flow, Musk said, “Need to reach positive cash flow before we have the luxury of anything else”.
We’re still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load. Need to reach positive cash flow before we have the luxury of anything else.
— Elon Musk (@elonmusk) July 15, 2023
Twitter’s recent decline in cash flow is however not meeting Musk’s expectations who in March this year, said that the company had a shot at being cash flow-positive next quarter, as the social media platform has been aggressively cutting costs.
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Following Musk’s takeover from Twitter last year October, about 50% of the platform’s top 1000 advertisers have paused advertisements on the app. The resounding sentiment was that brands were wary of content on Twitter, and therefore brand safety and suitability under the leadership of Musk, a self-proclaimed “free speech absolutist” was necessary.
In a bid to improve its cash flow, Twitter reduced its non-debt expenditures to $1.5 billion from a projected $4.5 billion in 2023, helped by cutting its cloud services bill by 40% and closing one data center. It has also laid off thousands of employees.
Musk also revealed that Twitter faces annual interest payments of about $1.5 billion as a result of the debt it took on in the take-private deal.
Making ads more relevant on the platform is one of Twitter’s main focus. While speaking at an investor’s conference in March this year, Musk made the disclosure that Twitter earns 5 to 6 cents per hour with users spending a combined “130 million hours of their time per day” on the platform. He further noted that the company could increase it to 15 to 20 cents.
Luring advertisers on Twitter is critical for Musk, after many fled in the early months after his takeover of the social media platform. In a bid to improve Twitter ads revenue, Musk appointed Linda Yaccarino, an NBC Universal executive with deep ties to the advertising industry to succeed him as Twitter’s CEO.
Following Yaccarino’s appointment, industry insiders applauded the move made by Musk to hire an extremely savvy and skilled leader which they revealed signals a positive change for Twitter.
They stated that the former NBC Universal executive completely understands how important it is to put valuable products on the market so that advertisers have an active and engaged audience to reach.
On resuming her duty as Twitter’s CEO, Yaccarino in June, told investors that Twitter plans to focus on video, creator, and commerce partnerships, and is in early talks with political and entertainment figures, payments services, and news and media publishers.
Just recently, Twitter began sharing advertising revenue with select verified users with large followings, with some of the initial $5 million in payouts going to far-right influencers.
This act has attracted tech giants who have embraced Twitter’s creator economy, especially with considerable headwinds gathering in the traditional advertising marketplace. Twitter is now trying to draw more content creators to the platform.