Fri. Dec 13th, 2024

Elon Musk says Twitter is roughly breaking even. That looks like vindication for his haphazard management but he’ll need a sharper plan to get to profitability.<!-- wp:html --><p>Elon Musk has brought Twitter to break even through an aggressive approach to management.</p> <p class="copyright">Susan Walsh/AP</p> <p>Elon Musk's reign of chaos at Twitter may have saved it from collapse, but there's a long way to go.<br /> The Twitter boss said on Tuesday the company is roughly breaking even after drastic cost cutting.<br /> But the same aggressive strategy won't work if he wants to turn a long-term profit.</p> <p>In the <a href="https://www.businessinsider.com/elon-musk-twitter-reach-agreement-to-close-acquisition-deal-2022-10">nearly six months since Elon Musk's takeover of Twitter</a>, its employees might be forgiven for feeling like they're being ruled by a chaos agent.</p> <p>Musk's stop-start $44 billion buyout ended with most of the C-suite being fired or walking out, <a href="https://www.businessinsider.com/elon-musk-twitter-layoffs-lowest-headcount-2023-1">a dramatic cut of employees from over 7,500</a> to roughly 1,500, an advertiser exodus, and numerous lawsuits. </p> <p>But...has it worked?</p> <p>The Twitter boss <a href="https://www.businessinsider.com/elon-musk-twitter-truth-free-speech-sell-44-billion-2023-4">told the BBC on Tuesday</a> that although "the pain level of Twitter has been extremely high" since he took charge, the company is now "roughly breakeven." Had it continued its pre-buyout trajectory, Musk reckons the company had four months left before it ran out of cash.</p> <p>We don't know what "roughly breakeven" means in any detail, since Twitter is now a private company and won't release quarterly financials. But if Musk's comments are accurate, he will likely take the company's improving financial performance as validation for his chaotic theory of management, and his belief that <a href="https://www.businessinsider.com/twitter-revenue-per-employee-collapsed-before-musk-takeover-2023-4">Twitter was bloated and spending well beyond its means</a>. </p> <p>But taking Twitter from breakeven to sustainable profitability is another feat altogether.</p> <h2><strong>How chaos </strong><strong><em>has</em></strong><strong> helped Twitter break even</strong></h2> <p>In the run-up to Musk's completion of the Twitter buyout on October 27, it was clear that the company's finances were not in a good way. </p> <p>In 2021, the last full year before Twitter's buyout, the company made a net loss of $222.4 million on $5.1 billion of revenue. This was better than the $1.1 billion Twitter lost in 2020, but still indicative of the firm's struggle for consistent profitability.</p> <p>For Musk, then, <a href="https://www.businessinsider.com/elon-musk-twitter-staff-commit-extremely-hardcore-work-laid-off-2022-11">an "extremely hardcore" approach to management</a> seemed necessary. He cut employee numbers from over 7,500 to a little more than 1,000 in the space of a few months. It's been a rough ride but the company is, just about, operational.</p> <p><a href="https://www.bbc.co.uk/iplayer/episode/l00569bp/elon-musk-talks-to-the-bbc" target="_blank" rel="noopener">Musk also told the BBC</a> that the company has cut the number of data centers it uses from three to two to save costs while making improvements to its algorithm that reduce its demands for computational power. </p> <p>He also suggested that fears <a href="https://www.businessinsider.com/twitter-advertisers-get-used-to-elon-musk-unpredictability-report-2023-1">advertisers would quit permanently may be overblown</a>, telling the broadcaster that most have either returned or said they would, potentially keeping the single most important source of revenue intact. </p> <p>"If Disney feels comfortable advertising children's movies, and Apple feels comfortable advertising iPhones, those are good indicators that Twitter is a good place to advertise," he said during the interview.</p> <p>Musk, at least for the interim, showed that <a href="https://www.businessinsider.com/apple-revenue-per-employee-shows-how-it-avoided-mass-layoffs-2023-4">aggressive cost-cutting</a> was never going to kill Twitter. Indeed, other tech CEOs have followed suit, axing up to 10% of their respective workforces.</p> <h2><strong>But chaos won't get to profit</strong></h2> <p>Musk cannot continue cost-cutting indefinitely and will need to find sustainable ways to turn Twitter profitable (and pay off the interest on the debt financing he took out to finance his buyout).</p> <p>These longer-term efforts are looking more wobbly. </p> <p>A key initiative the social-media boss is trying to see through is Twitter Blue, a subscription service where users pay for the blue tick that signals noteworthiness.</p> <p>But uptake so far has been slow. Earlier this month, <a href="https://www.bloomberg.com/news/articles/2023-04-04/musk-s-month-pushing-twitter-blue-failed-to-win-many-subscribers" target="_blank" rel="noopener">Bloomberg reported that just 4% of people</a> who visited the Twitter Blue sales website opted to sign up. </p> <p>Another, possibly terminal, issue: Musk seems not to have quite figured out what he wants Twitter to <em>be</em>.</p> <p>Take the firm's (reversed) decision to block likes and retweets of posts that link out to rival posting platform Substack. If Twitter really is the "what's happening" platform, it seems ill-advised to block obvious sources of news. That decision has ended up driving away content creators, including one-time Musk ally Matt Taibbi, who <a href="https://twitter.com/mtaibbi/status/1644428913651642387?s=20" target="_blank" rel="noopener">has not tweeted since April 7</a>.</p> <p>Relatedly, he has taken an aggressive stance against news organizations — noticeably liberal outlets — slapping NPR with a "state-affiliated media" label. NPR <a href="https://www.npr.org/2023/04/12/1169269161/npr-leaves-twitter-government-funded-media-label" target="_blank" rel="noopener">described the labeling as "false"</a> and has now quit Twitter, despite its main account having almost 9 million followers. Musk also removed verification from the New York Times' Twitter account after the publication said it wouldn't pay for a checkmark.</p> <p>Musk did suggest to the BBC that total user time on Twitter was at an all-time high, with the company recently passing 8 billion user minutes per day. That's no small feat in a world where Twitter competes with everything from TikTok to Netflix.</p> <p>But if he wants Twitter to make money consistently, Musk needs users coming back for the long run. Chaos won't do that.</p> <div class="read-original">Read the original article on <a href="https://www.businessinsider.com/elon-musk-style-helps-twitter-break-even-but-not-profit-2023-4">Business Insider</a></div><!-- /wp:html -->

Elon Musk has brought Twitter to break even through an aggressive approach to management.

Elon Musk’s reign of chaos at Twitter may have saved it from collapse, but there’s a long way to go.
The Twitter boss said on Tuesday the company is roughly breaking even after drastic cost cutting.
But the same aggressive strategy won’t work if he wants to turn a long-term profit.

In the nearly six months since Elon Musk’s takeover of Twitter, its employees might be forgiven for feeling like they’re being ruled by a chaos agent.

Musk’s stop-start $44 billion buyout ended with most of the C-suite being fired or walking out, a dramatic cut of employees from over 7,500 to roughly 1,500, an advertiser exodus, and numerous lawsuits. 

But…has it worked?

The Twitter boss told the BBC on Tuesday that although “the pain level of Twitter has been extremely high” since he took charge, the company is now “roughly breakeven.” Had it continued its pre-buyout trajectory, Musk reckons the company had four months left before it ran out of cash.

We don’t know what “roughly breakeven” means in any detail, since Twitter is now a private company and won’t release quarterly financials. But if Musk’s comments are accurate, he will likely take the company’s improving financial performance as validation for his chaotic theory of management, and his belief that Twitter was bloated and spending well beyond its means

But taking Twitter from breakeven to sustainable profitability is another feat altogether.

How chaos has helped Twitter break even

In the run-up to Musk’s completion of the Twitter buyout on October 27, it was clear that the company’s finances were not in a good way. 

In 2021, the last full year before Twitter’s buyout, the company made a net loss of $222.4 million on $5.1 billion of revenue. This was better than the $1.1 billion Twitter lost in 2020, but still indicative of the firm’s struggle for consistent profitability.

For Musk, then, an “extremely hardcore” approach to management seemed necessary. He cut employee numbers from over 7,500 to a little more than 1,000 in the space of a few months. It’s been a rough ride but the company is, just about, operational.

Musk also told the BBC that the company has cut the number of data centers it uses from three to two to save costs while making improvements to its algorithm that reduce its demands for computational power. 

He also suggested that fears advertisers would quit permanently may be overblown, telling the broadcaster that most have either returned or said they would, potentially keeping the single most important source of revenue intact. 

“If Disney feels comfortable advertising children’s movies, and Apple feels comfortable advertising iPhones, those are good indicators that Twitter is a good place to advertise,” he said during the interview.

Musk, at least for the interim, showed that aggressive cost-cutting was never going to kill Twitter. Indeed, other tech CEOs have followed suit, axing up to 10% of their respective workforces.

But chaos won’t get to profit

Musk cannot continue cost-cutting indefinitely and will need to find sustainable ways to turn Twitter profitable (and pay off the interest on the debt financing he took out to finance his buyout).

These longer-term efforts are looking more wobbly. 

A key initiative the social-media boss is trying to see through is Twitter Blue, a subscription service where users pay for the blue tick that signals noteworthiness.

But uptake so far has been slow. Earlier this month, Bloomberg reported that just 4% of people who visited the Twitter Blue sales website opted to sign up. 

Another, possibly terminal, issue: Musk seems not to have quite figured out what he wants Twitter to be.

Take the firm’s (reversed) decision to block likes and retweets of posts that link out to rival posting platform Substack. If Twitter really is the “what’s happening” platform, it seems ill-advised to block obvious sources of news. That decision has ended up driving away content creators, including one-time Musk ally Matt Taibbi, who has not tweeted since April 7.

Relatedly, he has taken an aggressive stance against news organizations — noticeably liberal outlets — slapping NPR with a “state-affiliated media” label. NPR described the labeling as “false” and has now quit Twitter, despite its main account having almost 9 million followers. Musk also removed verification from the New York Times’ Twitter account after the publication said it wouldn’t pay for a checkmark.

Musk did suggest to the BBC that total user time on Twitter was at an all-time high, with the company recently passing 8 billion user minutes per day. That’s no small feat in a world where Twitter competes with everything from TikTok to Netflix.

But if he wants Twitter to make money consistently, Musk needs users coming back for the long run. Chaos won’t do that.

Read the original article on Business Insider

By