Could Twitter Be More Profitable In Elon Musk’s Hands? -By ASC

Twitter’s revenue is mostly derived from advertising rather than its user base.


Since its announcement in 2013, Twitter has only occasionally made a profit, although it has played an important role in politics and culture around the world.

The company’s announcement on Monday that it has reached an agreement for Tesla boss Elon Musk to buy it directly raises the question of whether this will lead to a brighter financial future for Twitter?

Musk has downplayed economic considerations as a motivation for his purchase, saying earlier this month at the TED2022 conference that, “This is not a way to make money.”

Musk continued, “It’s just my strong and intuitive feeling that having a public platform that is maximally trusted and widely inclusive is very important for the future of civilization.”

Listed on the New York Stock Exchange for less than nine years, Twitter has posted a net loss every year, except for 2018 and 2019 when it made a profit of more than $ 1 billion.

Musk paid more than $ 44 billion for the company, a smaller amount than Facebook’s valuation of more than $ 500 billion.

Twitter’s revenue is mostly derived from advertising rather than its user base, which isn’t large enough to cover its finances.

At the end of last year, it claimed 217 million so -called “monetized” users, were exposed to advertising on the platform. That’s far from Facebook’s 1.93 billion subscribers.

Twitter is scheduled to release its first quarter results on Thursday. Wall Street expects earnings per share of three cents and revenue of $ 1.2 billion.

– Profit is not a priority –

While Twitter’s business prospects may not be his main concern, the world’s richest man will find at least not losing money, especially since part of the acquisition could be funded by his own funds.

In a securities filing released last week, Musk pointed to a $ 13 billion debt facility from a financing consortium led by Morgan Stanley, a separate $ 12.5 billion margin loan from the same bank, as well as $ 21 billion of his personal wealth as being behind the deal. .

Mr. Musk has not yet detailed how he intends to increase Twitter’s revenue.

However in a tweet, he suggested lowering the price of Twitter Blue, the network’s paid version that costs $ 2.99 a month, giving certified accounts to paying customers and removing advertising for these customers. He then retracted the message.

Another option in Musk’s hands is to reduce manpower, which may be in line with his desire to ease content moderation on the platform.

By the end of 2021, Twitter, based in San Francisco, employs 7,500 people worldwide. It will also have about 1,500 moderators worldwide by 2020, according to a New York University business school study.

Musk may also be looking to accelerate user growth and thus advertise revenue, or add new paid features to the platform.

“He has his own plans. If he can keep the model with a subscription -based offer along with free options, that could work,” said Angelino Zino, an analyst at CFRA.

– Debt worries –

By financing most of the acquisition with a bank loan, Musk will increase Twitter’s debt burden, and on Monday, S&P Global Ratings warned that it is considering downgrading Twitter’s rating from BB+.

Zino noted that Musk could eventually work with other investors so as not to do his fortune alone.

“If he brings other great thinking in the equity aspect, there may be a greater probability of success,” he said.

(Except for the headline, this story has not been edited by AGRASMARTCITY staff and is published from a syndicated feed.)


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