Twitter’s cash flow remains negative because of a nearly 50 per cent drop in advertising revenue and a heavy debt load, Elon Musk said on Saturday, falling short of his expectation in March that Twitter could reach cash flow positive by June.
“Need to reach positive cash flow before we have the luxury of anything else,” Musk said in a tweet replying to suggestions on recapitalisation.
This is the latest sign that the aggressive cost-cutting measures since Musk acquired Twitter in October alone are not enough to get Twitter to cash flow positive, and suggests Twitter’s ad revenue may have not recovered as fast as Musk suggested in an interview in April with the BBC that most advertisers had returned to the site.
After laying off thousands of employees and cutting cloud service bills, Musk had said the company reduced its non-debt expenditures to $1.5 billion from a projected $4.5 billion in 2023.
Twitter also faces annual interest payments of about $1.5 billion as a result of the debt it took on in the $44 billion deal that turned the company private.
It is unclear what time frame Musk was referring to by the 50 per cent drop in ad revenue. He has said Twitter was on track to post $3 billion in revenue in 2023, down from $5.1 billion in 2021.
Ever since he took over Twitter in a $44 billion deal last fall, Musk has tried to reassure advertisers who were concerned about the ouster of top executives, widespread layoffs and a different approach to content moderation. Some high-profile users who had been banned were allowed back on the site.
In April, Musk said most of the advertisers who left had returned and that the company might become cash-flow positive in the second quarter.
Twitter has been criticized over lax content moderation, followed by an exodus of many advertisers who did not want their ads appearing next to inappropriate content.
Musk’s hiring of Linda Yaccarino, former ad chief at Comcast’s NBCUniversal as CEO, signaled that ad sales are a priority for Twitter even as it works to increase subscription revenue.
Yaccarino started working at Twitter in early June and has told investors Twitter plans to focus on video, creator and commerce partnerships and is in early talks with political and entertainment figures, payments services, and news and media publishers.
But since then, Twitter has upset some users by imposing new limits on how many tweets they can view in a day, and some users complained that they were locked out of the site. Musk said the restrictions were needed to prevent unauthorised scraping of potentially valuable data.
On Thursday, Twitter said that select content creators will be eligible to get a part of the ad revenue the company earns in an attempt to draw more content creators to the site.
Twitter got a new competitor this month when Facebook owner Meta launched a text-focused app, Threads, and gained tens of millions of sign-ups in a few days. Twitter responded by threatening legal action.
