Posted Dec 22 2022 at 04:51 PMUpdated 22 Dec. 2022 at 17:20
Will Twitter be close to financial equilibrium in 2023? For Elon Musk, in any case, the social network is on the right track. Twitter could indeed generate a “generally” positive cash flow on this date, according to him. The clear cuts made in recent weeks, especially in the workforce, have gone through this. Without them, the group was on track to end the year with a negative cash flow of 3 billion dollars, explained the billionaire. “I now think that Twitter, in reality, will be okay next year,” Elon Musk assured during an audio conference on Twitter Spaces.
The new owner of the platform estimated that it should generate $3 billion in revenue next year, with $1 billion in cash on the balance sheet. In 2021, the social network had achieved higher sales, at 5.1 billion. Next year, Twitter’s costs were expected to reach $6.5 billion, up from $5 billion in 2021, due in part to payments of $1.5 billion related to the debt Musk took on – and housed at Twitter – to buy out the company. microblogging network. Over seven or eight years, the 13 billion in debt should give rise to disbursements of around 9 billion.
Even before the Musk era, Twitter has long been fragile compared to other much bigger social networks. More a political crossroads than a cash machine, the platform took twelve years to generate, in 2018, the first profit in its history. Since then, Twitter had again experienced difficulties. In the second quarter of 2022, its net loss had reached … 270 million, according to the latest results available, before the takeover by Elon Musk this fall. Over the whole of 2021, the platform had posted a net loss of 221 million.
An “aeroplane swooping from the nose to the ground”
This return to equilibrium will not be painless. After taking over the social network in October, Elon Musk slashed costs so much that more than half of the approximately 7,500 employees, including CEO Parag Agrawal and many moderators, were laid off. Unheard of in the world of social networks which, until now, recruited en masse.
When Elon Musk took control of Twitter, the platform was “like a plane swooping down from the nose at high speed, with engines on fire and throttles no longer working,” quipped the billionaire.
However, the return to profitability will be “difficult”, recognized Elon Musk. And for good reason: in recent weeks, many advertisers have left the platform, worried about the new, very unpredictable content moderation policy advocated by Elon Musk. However, digital advertising represents… 90% of Twitter’s revenues.
Faced with this, the billionaire is looking to raise funds. But, in the longer term, Elon Musk wants above all to transform the economic model of Twitter by favoring subscriptions, payment inside the application, the sale of licenses, etc. Objective: to ensure that advertising represents only 45% of the platform’s revenues in 2028, as he explained in a document to investors in April.
But these initiatives will take time to materialize. At this stage, the boss-billionaire was content to relaunch Twitter Blue, the paid version of Twitter giving access to additional services, such as reading mode. For now, this offer, ranging from 8 to 11 dollars in the United States, is only available in four other countries (United Kingdom, Canada, Australia, New Zealand).
According to the “New York Times”, 140,000 Twitter users have opted for Twitter Blue. Elon Musk is still far from his goal of one in six paying subscribers by 2028, according to the document presented to investors. Such a ramp-up alone would bring in $5.7 billion in revenue.