Elon Musk stated on Saturday that Twitter continues to experience negative cash flow due to a nearly 50% decline in advertising revenue and a substantial debt burden. This falls short of Musk’s previous expectation in March that Twitter would achieve positive cash flow by June.
In response to suggestions on recapitalization, Musk tweeted, “We need to achieve positive cash flow before we can consider anything else.”
This recent development indicates that the aggressive cost-cutting measures implemented since Musk acquired 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 indicated in an April interview with the BBC, where he stated that most advertisers had returned to the platform.
Despite laying off numerous employees and reducing cloud service expenses, Musk mentioned that the company has managed to decrease its non-debt expenditures from an expected $4.5 billion to $1.5 billion in 2023. However, Twitter still faces annual interest payments of approximately $1.5 billion due to the debt incurred in the $44 billion deal that privatized the company.
The specific timeframe Musk referred to regarding the 50% drop in ad revenue remains 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, resulting in the departure of several advertisers who did not want their ads displayed alongside inappropriate content.
By appointing Linda Yaccarino, former ad chief at Comcast’s NBCUniversal, as CEO, Musk signaled that ad sales are a priority for Twitter, even as the company strives to increase its subscription revenue.
Yaccarino joined Twitter in early June and has informed investors of the company’s plans to prioritize video, creator and commerce partnerships. Twitter is also engaged in initial discussions with political and entertainment figures, payment service providers, and news and media publishers.
In an effort to attract more content creators to the platform, Twitter recently announced that select creators will be eligible to receive a portion of the ad revenue generated by the company.
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