Elon Musk stated on Saturday that Twitter’s cash flow remains negative due to a significant decline of almost 50% in advertising revenue and the burden of heavy debt. This falls short of Musk’s previous expectation in March that Twitter could achieve positive cash flow by June.
In response to suggestions on recapitalization, Musk tweeted, “Need to reach positive cash flow before we have the luxury of anything else.” He further mentioned on Sunday that Twitter did not experience the anticipated increase in advertising revenue in June, but there are more promising prospects for July. Musk also noted that Twitter Spaces, despite being an “all-cost” feature, has not generated revenue yet.
These statements indicate that the aggressive cost-cutting measures implemented since Musk’s acquisition of Twitter in October have not been sufficient to achieve positive cash flow. It also suggests that Twitter’s advertising revenue may not have recovered as quickly as Musk had previously suggested in an interview with the BBC, where he mentioned that most advertisers had returned to the platform.
Musk had previously announced substantial employee layoffs and reductions in cloud service expenses. Twitter faces annual interest payments of approximately $1.5 billion as a result of the debt incurred in the $44 billion deal that privatized the company.
The specific time frame referred to by Musk regarding the 50% drop in ad revenue is unclear. He had previously stated that Twitter was on track to generate $3 billion in revenue in 2023, down from $5.1 billion in 2021.
Twitter has faced criticism for its lax content moderation, leading to the departure of many advertisers who did not want their ads appearing alongside inappropriate content.
Musk’s appointment of Linda Yaccarino, the former ad chief at Comcast’s NBCUniversal, as CEO signaled that ad sales are a priority for Twitter. Simultaneously, the company aims to increase subscription revenue. Yaccarino joined Twitter in early June and has informed investors about Twitter’s focus on video, creator and commerce partnerships. The company is also in preliminary discussions with political and entertainment figures, payment services, and news and media publishers.
Recently, Twitter announced that select content creators will have the opportunity to receive a portion of the ad revenue earned by the company. This move aims to attract more content creators to the platform.