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Twitter Struggles with Negative Cash Flow as Ad Revenue Plummets: Elon Musk

Twitter's hopes for achieving positive cash flow by June have been thwarted by a drastic decrease in ad revenue and a hefty debt load, according to CEO Elon Musk.

Elon Musk
Elon Musk

Elon Musk's Twitter Revenue Projections Fall Short

Elon Musk, on Saturday, confirmed that Twitter's cash flow remains in the red, chiefly due to a near 50% decline in advertising revenue and a substantial debt burden. Musk's revelation sharply contrasts with his previous March predictions that Twitter would become cash flow positive by June. He tweeted, "Need to reach positive cash flow before we have the luxury of anything else," in response to suggestions on recapitalization.

Twitter’s Cost-Cutting Measures Insufficient to Offset Negative Cash Flow

Twitter's recent struggle to achieve positive cash flow signals that the aggressive cost-cutting strategies adopted since Musk's takeover in October are insufficient. These findings imply a slower recovery in Twitter's ad revenue than what Musk had indicated in an April interview with the BBC, where he stated most advertisers had returned to the platform.

After eliminating thousands of jobs and slashing cloud service expenses, Musk reported that Twitter was successful in reducing its non-debt expenditures to $1.5 billion from an anticipated $4.5 billion in 2023. Nevertheless, Twitter is burdened with annual interest payments approximating $1.5 billion due to the debt incurred from the $44 billion deal that privatized the company.

Sharp Decline in Twitter Ad Revenue: A Closer Look

Musk did not specify the exact time frame about the 50% reduction in ad revenue. However, he mentioned that Twitter is on track to report $3 billion in revenue in 2023, a drop from $5.1 billion in 2021.

Content Moderation Concerns and Advertiser Exodus

Twitter has faced considerable backlash over its lax content moderation policies. This scrutiny led to an exodus of several advertisers unwilling to display their ads alongside inappropriate content.

The Future of Twitter: Ad Sales and Subscription Revenue

Musk's appointment of Linda Yaccarino, the former ad chief at Comcast's NBCUniversal, as CEO signals that Twitter prioritizes ad sales while simultaneously striving to increase subscription revenue. Yaccarino, who joined Twitter in early June, informed investors about Twitter's intent to concentrate on video, creator, and commerce partnerships. She revealed ongoing preliminary discussions with political and entertainment figures, payment services, and news and media publishers.

In a recent move to attract more content creators to its platform, Twitter announced on Thursday that selected content creators would be eligible for a share of the ad revenue the company generates.