Twitter Faces Financial Challenges As Ad Revenue Declines

Musk acquired Twitter in October of last year for approximately $44 billion, which included around $13 billion in debt. To finance the transaction, Musk sold billions of dollars’ worth of Tesla stock. He also implemented cost-cutting measures by reducing the workforce and trimming expenses related to cloud services. Musk previously stated that the company aimed to decrease non-debt expenses from $4.5 billion to $1.5 billion in 2023.

However, in January of this year, hundreds of advertisers reduced or halted their advertising spending on Twitter in response to controversial moves made by Musk, including significant layoffs, platform changes, account restorations, and alterations to content moderation practices. These actions led to a decline in ad revenue for the platform.

Responding to a business suggestion from a Twitter user, Musk acknowledged the importance of turning the cash flow positive before pursuing other initiatives. He emphasized the need to address the current negative cash flow situation.

Musk previously claimed in an interview with the BBC in April that “almost all” advertisers had resumed their ad campaigns on Twitter. He stated that the company had achieved “roughly breakeven” and expected cash flow to turn positive in the next quarter. However, market research firm Sensor Tower estimated that Twitter’s ad spending dropped by 89% to $7.6 million within the first two months of this year. Before Musk’s acquisition, the top 10 advertisers spent $71 million on ads from September to October 2022.

To tackle the advertising business challenges, Musk appointed Linda Yaccarino, a former executive from NBCUniversal’s advertising department, as Twitter’s CEO. This move has raised hopes within the media industry that Yaccarino’s appointment will help address the urgent challenges facing Twitter’s advertising business.

In recent days, Twitter has begun allocating a portion of its advertising revenue to select content creators on its platform. However, some high-profile accounts on Twitter have expressed disappointment over their lack of eligibility to earn ad revenue through this program.

Conclusion
The future of Twitter’s financial performance remains uncertain as the company seeks to overcome its financial challenges and regain stability in its advertising business.