Shulou(Shulou.com)11/24 Report--

Since buying Twitter for $44 billion on October 27 last year, Tesla CEO Elon Musk (Elon Musk) has been overhauling Twitter in an attempt to transform it and diversify its business beyond advertising revenue. He declared that the purpose of the reform is to save costs and prevent the company from going bankrupt.

As early as last November, Musk warned that Twitter could go bankrupt. In December, he added that the company was on track to achieve a basic "cash flow break-even" by 2023.

In early February, Musk pointed out that the past three months had been "extremely difficult" because he had to save Twitter from bankruptcy and he had to run Tesla and SpaceX. He said Twitter still faces challenges, but if it persists, there is a tendency to break even.

Just about a month later, Musk said at a Morgan Stanley investor meeting on Tuesday local time that Twitter's financial situation was improving and that the company's cash flow would break even in the second quarter of this year. it may even become positive during this period.

It seems that Musk has improved Twitter's financial position and saved Twitter from bankruptcy. So, how did he do it? It is reported that Musk has taken measures to cut costs and increase income in the past few months, but these efforts have had little effect. They can only save Twitter from bankruptcy and will not help Twitter make more money.

The biggest problem for Twitter is how to make money and how to earn back Musk's $44 billion (currently about 306.24 billion yuan) investment. So when will Musk earn back his $44 billion investment? TechWeb calculates that the investment will take at least 11 years to earn back.

"scare off" 500 financiers, Twitter is not going to make it. In fact, Twitter's revenue has fallen sharply since Musk bought it. This week, foreign media quoted people familiar with the matter as saying that Twitter said in its latest news to investors that its revenue and adjusted profit fell by about 40% year-on-year in December last year. The reason is that a large number of advertisers have stopped placing ads on the Twitter platform.

Before Musk bought Twitter, advertising was Twitter's most important source of revenue. After Musk's acquisition of Twitter, advertisers pulled out of Twitter or cut back on advertising spending on the Twitter platform because of concerns about Musk's content censorship plan and the general chaos within Twitter, as well as the advice of major global advertising companies such as Epez and IPG to suspend advertising on Twitter.

According to statistics by market research firm Media Matters in late November 2022, half of Twitter's top 100 advertisers have stopped advertising on Twitter platforms, including Meta, Coca-Cola, General Motors, Volkswagen, Carlsberg, General Mills and Kellogg.

Faced with this situation, Musk complained on Twitter on November 4, 2022 that Twitter's revenue had fallen sharply as a result of radical groups putting pressure on advertisers. Not only that, at the end of November 2022, an industry insider said Musk had personally called CEO, a company that stopped advertising on Twitter, to reprimand them.

Nevertheless, the decline in advertising has not abated. On January 18, 2023, foreign media reported that more than 500 advertisers had suspended their ads on Twitter since Musk bought Twitter.

In addition, more than 2/3 of the top 100 Twitter advertisers before Musk's acquisition had given up advertising on Twitter as of late February 2023, according to marketing intelligence firm Pathmatics.

In addition to suspending advertising on Twitter, some companies have cut back on advertising on Twitter. For example, GroupM, the world's largest ad buying company, cut advertising spending on the Twitter platform by 40% by 50%.

After Mr Musk took over Twitter, Twitter's advertising revenue fell 55 per cent in November 2022 from a year earlier and 71 per cent in December, as some advertisers cut spending on the platform, according to Standard Media Index, an advertising research firm.

Trying to avoid bankruptcy, Twitter offered a big way to cut costs and increase revenue. In the face of reduced advertising and declining revenue, Musk began to take a two-pronged approach, cutting costs while trying to increase income.

In order to cut costs, Musk first raised the "big knife" of layoffs on Twitter. According to reports, since the completion of the acquisition of Twitter, Twitter has carried out wave after wave of layoffs under Musk's leadership, and many of the employees responsible for review and policy making have been fired or left the company. Twitter advertising team staff are also left after layoffs.

In December, Mr Musk said the number of Twitter employees had fallen from nearly 8000 before his acquisition to about 2000. Since then, the company has made a number of smaller layoffs, coupled with the resignation of employees, the number of Twitter employees has been declining.

Twitter just made a new round of layoffs over the weekend, at least the eighth since Mr Musk took over. Today, Twitter has laid off thousands of employees, reducing the total number of employees by more than 70%.

In response to the massive layoffs on Twitter, Musk tweeted that the company lost more than $4 million (about 28.8 million yuan) a day and had no choice but to cut jobs.

Although some large technology companies have had more layoffs in terms of volume, Twitter has a higher percentage of layoffs. Twitter now has the lowest number of employees in a decade, down from 2712 when the company went public in 2013.

Now, Musk is trying to keep the Twitter platform running with fewer employees. However, repeated failures of the platform have also become the focus of attention. Twitter suffered at least four worldwide failures in February, according to Internet watcher NetBlocks. By contrast, there were only nine failures on Twitter in all of 2022.

On Monday, Twitter just had a major outage. NetBlocks said it was the sixth major outage on Twitter in 2023, up from three in the same period last year.

Musk responded to the failure on Twitter that it was a small change in Twitter's data access tool that caused the failure. "for no reason, the code stack is very fragile and eventually needs to be completely rewritten."

In addition to cutting costs through layoffs, Mr Musk has eliminated employee benefits, such as health care and free lunches at San Francisco headquarters, and adjusted office strategies, such as the abolition of telecommuting, to further increase revenue and cut expenditure.

In addition, Musk announced in November 2022 that he plans to save $1 billion a year on infrastructure and cloud services.

On Tuesday, he said he had cut cloud computing spending by 40% and reduced Twitter's data centers from three to two in an effort to improve Twitter's finances.

Not only that, in order to save money and increase income, Musk also tried to get employees to buy green plants in Twitter offices, and even auctioned Twitter office supplies (such as chairs), industrial kitchen equipment, statues and office machines online. In order to save money, he also fired cleaners and office maintenance staff, resulting in the deterioration of the office environment.

Twitter has also taken some extreme measures to cut costs, such as refusing to pay rent for its San Francisco headquarters and other offices around the world, and refusing to pay nearly $2.9 million in private charter flights the week Mr Musk took over.

In addition to cutting costs, Musk is also looking for ways to increase revenue for Twitter. It is reported that in order to retain advertisers, Twitter has launched what has been described as the "most generous" incentive for advertisers, that is, if Twitter advertisers spend a certain amount of money on brand advertising, they will get additional exposure opportunities. After that, Musk also provides advertisers with more control to attract advertisers.

In order to solve the problem of the endless emergence of fake accounts, Twitter launched an improved version of the "Blue V Authentication" service. After the launch of the service, iPhone users rose from $8 to $11 a month, while subscription fees for non-iPhone users remained unchanged at $8.

In addition, Musk said on January 21, 2023 that Twitter would launch a higher-priced "zero advertising" subscription service. He has told employees that if the company does not generate substantial subscription revenue, it may not be able to survive the current economic crisis.

Due to the severe decline in advertising revenue, Twitter is also considering selling user names to increase revenue. In December, Musk said on Twitter that he wanted to clear inactive accounts on Twitter and release about 1.5 billion user names.

In addition, Twitter is trying to introduce payment functions into its platform as part of the company's plans to expand new sources of revenue. On Tuesday, local time, Mr Musk said he still plans to introduce payment functions into the platform in the future, believing that "simply by providing people with convenient payment options, it is possible to become the largest financial institution in the world".

Although Musk has taken measures to reduce costs and increase income, these efforts have had little effect. On Tuesday, local time, Musk said Twitter was "very unprofitable" and that each user could make a profit of 5 to 6 cents an hour. He added that he wanted to raise that figure to 15-20 cents an hour.

It will take 11 years to earn back the cost of buying Twitter for $44 billion. What is Musk looking for? Although Musk took steps to cut costs and increase revenue in the quarter when Mr Musk bought Twitter, in the fourth quarter of 2022, Twitter revenue fell 35 per cent to $1.025 billion, reaching only 72 per cent of its internal target. Before Musk took over, Twitter's revenue could reach 98% of its initial expectations.

On January 17, Twitter's one-day revenue fell 40% from a year earlier. It is estimated that if this trend continues, Twitter's revenue could fall to about $720 million (currently about 5.011 billion yuan) in the first quarter of this year.

If you take the highest value, that is, based on a quarterly revenue of $1 billion (currently about 6.96 billion yuan), Twitter can generate revenue of $4 billion a year (currently about 27.84 billion yuan), even if the company's costs fall to zero. It will take 11 years to earn back Musk's $44 billion investment.

If Musk fails to reverse the decline in Twitter advertising revenue, his $44 billion investment will be tied up for longer.

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