Elon Musk has revealed that Twitter’s cash flow remains negative due to a significant 50 percent decline in advertising revenue and a substantial debt burden. Musk’s statement on Saturday fell short of his previous expectation in March that Twitter would achieve positive cash flow by June.
In response to suggestions on recapitalization, Musk tweeted, “We need to achieve positive cash flow before we can consider anything else.” On Sunday, Musk further noted that Twitter did not witness the anticipated increase in advertising revenue in June, but he remained optimistic about July.
Musk also highlighted that Twitter Spaces, despite its popularity, has not generated any revenue yet and has been incurring costs, Reuters reported.
These developments indicate that the cost-cutting measures implemented since Musk’s acquisition of Twitter in October have not been sufficient to achieve positive cash flow.
They also suggest that Twitter’s ad revenue may not have recovered as quickly as Musk had indicated in an interview with the BBC in April, where he mentioned that most advertisers had returned to the platform.
Following massive layoffs and reductions in cloud service expenses, Musk stated that the company had managed to decrease its non-debt expenditures to $1.5 billion from an initially projected $4.5 billion for 2023.
Additionally, Twitter faces annual interest payments of approximately $1.5 billion due to the debt incurred during the $44 billion privatization deal.
The timeframe Musk was referring to regarding the 50 percent drop in ad revenue remains unclear. However, he previously stated that Twitter was on track to generate $3 billion in revenue in 2023, compared to $5.1 billion in 2021.
Twitter has faced criticism for its lax content moderation, leading to numerous advertisers pulling out to avoid associating their ads with inappropriate content.
Musk’s appointment of Linda Yaccarino, former ad chief at Comcast’s NBCUniversal, as CEO of Twitter signaled a strong focus on ad sales, even as the company aims to increase subscription revenue.
Yaccarino joined Twitter in early June and has informed investors of the company’s plans to prioritize video, creator, and commerce partnerships. Twitter is currently engaged in initial discussions with political and entertainment figures, payment services, and news and media publishers.
In a bid to attract more content creators, Twitter announced on Thursday that select creators would be eligible to receive a portion of the company’s ad revenue.