Twitter’s revenue mainly comes from advertising rather than its user base.
Paris:
Since going public in 2013, Twitter has only made occasional profits, even as it takes on a commanding role in politics and culture around the world.
The company’s announcement on Monday that it has reached an agreement for Tesla boss Elon Musk to buy it back outright raises the question of whether this will lead to a brighter financial future for Twitter.
Musk has downplayed economics as his driving force, saying earlier this month at the TED2022 conference, “This is not a way to make money.”
Musk continued, “It’s just my strong intuitive sense that having a fully trusted and widely inclusive public platform is critically important to the future of civilization.”
Listed on the New York Stock Exchange for less than nine years, Twitter has posted a net loss every year except 2018 and 2019 when it made just over $1 billion.
Musk is paying over $44 billion for the company, an amount well below Facebook’s valuation of more than $500 billion.
Twitter’s revenue comes mainly from advertising rather than its user base, which is not large enough to financially offset.
At the end of last year, it claimed 217 million so-called “monetizable” users who were exposed to ads on the platform. This number far exceeds the 1.93 billion Facebook subscribers.
Twitter is expected to release first-quarter results on Thursday. Wall Street expects earnings per share of 3 cents and revenue of $1.2 billion.
– Profitability is not a priority –
Even if Twitter’s business prospects may not be his primary concern, the world’s richest man will find a way to at least not lose money, especially as part of the purchase. may be financed by his own foundation.
In a securities filing released last week, Musk pointed to $13 billion in debt from a financial consortium led by Morgan Stanley, a separate $12.5 billion margin loan from the same company. bank, as well as $21 billion from his personal wealth behind the deal. .
Musk has yet to detail how he plans to increase Twitter’s revenue.
However, in a tweet, he offers a discount on Twitter Blue, the paid version of the network that costs $2.99 a month, grants certified accounts to paid subscribers, and removes ads. report to these customers. He later retracted the message.
Another option in Musk’s hands is to cut the workforce, which may align with his desire to ease content moderation on the platform.
By the end of 2021, Twitter, based in San Francisco, employed 7,500 people worldwide. It also has about 1,500 execs worldwide as of 2020, according to a study by the New York University business school.
Musk may also be looking to accelerate user growth and thus increase ad revenue, or add new paid features to the platform.
“He’s got his own plans,” said Angelino Zino, an analyst at CFRA.
– Worry about debt –
By financing a significant portion of the acquisition with bank loans, Musk will increase Twitter’s debt load, and on Monday, S&P Global Ratings warned that it was considering lowering Twitter’s rating from BB+ .
Zino noted that Musk could eventually team up with other investors so he doesn’t have to pledge his fortune alone.
“If he brings other great minds about the fair side of things, the odds of success are higher on his side,” he said.
(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)
