April 16, 2024

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Twitter’s ad revenue nearly halved following Elon Musk’s acquisition

Elon Musk’s acquisition of Twitter for $44 billion in October last year has resulted in a significant decline in the platform’s advertising revenue, with the company revealing a loss of nearly half its advertising earnings. The anticipated boost in sales for June did not materialise as expected, although Musk mentioned a slightly more promising outlook for July. In an effort to reduce costs, Musk had already terminated around 50% of Twitter’s workforce when he assumed control of the company in 2022.

Meanwhile, a competing app called Threads, which is linked to Instagram and designed by Meta, has amassed an estimated 150 million users. This integration with Instagram allows the platform access to a potential two billion users, providing a considerable advantage over Twitter. Additionally, Twitter is grappling with a substantial debt burden and continues to experience negative cash flow, according to Musk. However, he did not specify the timeframe for the 50% decline in ad revenue, emphasising the need to achieve positive cash flow before pursuing other endeavours.

Musk stated on Twitter that Twitter’s revenue for 2023 is projected to reach $3 billion, a decline from the $5.1 billion recorded in 2021, after implementing measures such as employee layoffs and reductions in cloud service expenses. These cost-cutting measures, however, have not been sufficient to entice advertisers back to the platform following changes to its content moderation rules, resulting in a prolonged decline in revenue. While acknowledging the challenging situation faced by Musk and Twitter, Meghana Dhar, the former head of partnerships at Snap and Meta, acknowledged that Twitter was already struggling prior to Musk’s acquisition, indicating a consistent downward trend in revenue.

Despite the ongoing challenges, Twitter’s recent appointment of Linda Yaccarino, previously head of advertising at NBCUniversal, as CEO suggests that advertising sales remain a key focus for the company. Yaccarino has outlined Twitter’s plans to prioritise video, creator, and commerce partnerships, engaging in early discussions with political and entertainment figures, payment services, and news and media publishers. As Musk remains the CEO and majority shareholder of Tesla, the electric car maker’s upcoming quarterly financial results will also be closely monitored.