Since Elon Musk took the helm at Twitter HQ the social media company has lost almost half of its advertising revenue, according to a Tweet recently fired off by the tech entrepreneur on Sunday.
This advertiser exodus, combined with steadily rising debts which now amount to $13 billion, is keeping Twitter's cash flow in the red, despite rash cost-cutting measures like multiple rounds of layoffs, office closures, and slashed employee paternal leave.
The company's rocky financial situation is exacerbated by the recent release of ‘Twitter killer' Threads — Meta's text-based conversation app that has already surpassed 150 million downloads.
Twitter Fails to Meet Ad Revenue Targets
Nestled in between a series of controversial memes and hot takes, Elon Musk recently Tweeted that Twitter is still experiencing negative cash flow, due to a ‘~50% drop in advertising revenue', and that they need to reach positive cash flow before having the ‘luxury of anything else.'
The Tweet also refers to Twitter's heavy debt load, which has been growing incrementally since the billionaire took over the platform last October, and currently sits at around $13 billion.
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
Musk explained that “Twitter Spaces” – the company's new live audio conversation platform – has yet to turn a profit and that the business wasn't able to hit advertising revenue targets in June. However, he attests that “July is a bit more promising”.
These dismal financial projections fly in the face of Musk's previous assertion that the company would be cashflow positive in June, and indicate a rocky start for new CEO Linda Yaccarino who has been implementing a series of fresh measures to try and attract advertisers back to the platform.
Twitter's Financial Worries Deepen
Musk's updates on Twitter's grave financial situation come just three days after the Tesla CEO was struck by a $500 million class action lawsuit over unpaid severance payments.
The lawsuit, which was filed by Twitter's former “Head of Total Rewards” Courtney McMillan, alleges that the company owes former workers around half a billion in severance pay, and that Musk was well aware of the established severance plan before making major reductions to the company's headcount.
This case mirrors a similar lawsuit filed last month that takes aim at Twitter's exec board for failing to pay workers bonuses that they were entitled to last year. Both cases accuse the company of not following through with payments promised to employees, and failing to communicate changes to affected workers.
If Twitter is forced to make these payouts, the damages will pile on the $13 billion of debt it amassed from its acquisition last year – making it even harder for the company to meet bill payments they've routinely been falling behind on.
Is Twitter Hanging on By a Thread?
Unfortunately for the blue bird, finances aren't the only concern threatening the company's survival in 2023.
Twitter is also facing rising competition from Meta-owned Threads, an insurgent text-based social media app that has already welcomed over 150 million users. Threads' format and function are remarkably similar to Twitter's – with both apps providing users with a way to share short messages, photos, and videos on public timelines.
Threads also has the additional benefit of being directly integrated with Instagram, allowing the photo-sharing app's one billion users to sign up to the platform easily, and creating a verification process that's much more legitimate and streamlined than Twitter.
This isn't to say that Twitter is out of the race completely, however. The town-hall-style platform still offers a number of useful features that Threads lacks – including instant messaging and hashtags – and according to the troupe of Tweets Musk sent out last Sunday, the app's usage is currently up 3.5% week on week.