Elon Musk hasn’t been CEO of Twitter for more than a week and we’ve already seen that his vision of the social network is one with plenty of paid features. Makes sense, doesn’t it? After all, why buy one of the biggest social networks in the world if not to make yourself even richer? Monetizing things like verifications or search results is a brilliant business strategy.
Not so much.
Buying Twitter is not Musk’s victory
Elon Musk did not want to buy Twitter. That’s what the latest evidence tells us. The CEO of Tesla made an inflated offer and when he realized the real value of the company he backed down. We could believe Musk and his speech that the company was lying about the bots.
The thing is, a judge was on the verge of not believing him. Twitter’s trial against the CEO of Tesla was not going well for him. All indications pointed to the fact that the court was going to order the tycoon to comply with his offer. This would have been disastrous, so Musk decided to go ahead with the purchase.
A red bag
And is that the purchase of Twitter does not make much sense, at least from a financial perspective. Twitter accounting sheets are in the red. Prior to the purchase, the social network had reported a loss in the company’s last quarter of $344 million. Not only this, but also the company was presenting the same problem as Facebook: a stagnation in the number of users.
It is curious that with this scenario Musk did not understand the reason why the company’s shares were at a price that allowed him to enter and then take control of the company.
Elon Musk pawned Twitter to pay for Twitter
Added to all this is an additional problem: the purchase of Musk has added millions of dollars to the debt that the company already has. Even being one of the richest men on the planet, the tycoon had no way to pay for the purchase of more than 40 billion dollars. So Musk borrowed close to 13 billion dollars in order to pay off this debt, money that he entered by putting the same company he just bought as collateral.
The New York Times presents a clear picture: Twitter currently has to make payments close to a billion dollars a year. Something that would not be a problem, except that the current debt exceeds the 2021 total earnings…and this was in the year before the fear of a global recession.
Ads don’t pay for memes, Elon
What can make the situation worse? Well, the problem is that the ads are no longer generating the same money as before for various reasons. The first is that competition spreads and tech companies see the cut when their advertisers don’t have the budget to run on all three.
Not only this, but there is an uncertainty in the markets. Even before Elon Musk took control of the company, advertising agencies were advising their clients to pause ads. Now that the chaos inside the offices of Twitter is evident, many advertisers have paused their campaigns until they have certain guarantees about the type of social network in which they are publishing.
Elon Musk’s plan feels improvised and unrealistic
Abroad Musk seems amused by the reaction to his new Twitter policies. He posts messages like this:
— Elon Musk (@elonmusk) November 2, 2022
The reality is that Twitter’s new CEO should be worried. For his plan to work does not require that the “celebrities” (as he called them) decide to accept this new Twitter Blue proposal: it must be a massive adoption and with clear privileges. Every week we get a new update, a new policy, a new way to monetize.
Elon Musk seems to be desperate to find a way to make a quick buck out of his social network. But the bluebirds seem to be chirping another tune.
Images: Montage ENTER.CO