Twitter was beforehand monitoring towards a “negative cash flow situation of $3 billion per year” earlier than the fee cuts, Musk mentioned on Wednesday in a Twitter Spaces audio chat.
Since taking on Twitter on Oct. 27, Musk has laid off 50% of the corporate’s staff and demanded remaining employees decide to lengthy hours and a “hardcore” tradition, prompting extra worker departures. The controversial strikes have rattled advertisers, who contribute 90% of Twitter’s income.
“We have an emergency fire drill on our hands,” Musk mentioned. “That’s the reason for my actions.”
Twitter presently has a little bit over 2,000 staff, Musk mentioned on Wednesday.
Musk mentioned Twitter was beforehand on observe to spend $5 billion subsequent 12 months. With $12.5 billion in debt as a result of acquisition, Twitter was going through a web money outflow of $6.5 billion with income of about $3 billion subsequent 12 months. That amounted to unfavourable money movement of $3 billion, Musk mentioned, including that Twitter has $1 billion in money.
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Twitter’s annual income in 2021 was $5 billion and in February, the corporate forecast that 2022 income would develop within the low-to-mid 20% vary.
During the Spaces session, Musk mentioned his “number one priority” was to develop subscriber income so it turns into a significant a part of Twitter’s business. Currently, corporations are chopping promoting budgets in a weak economic system.
Musk, who additionally runs Tesla Inc, mentioned main advertisers have advised him Twitter advertisements have the bottom return on funding out of all social media platforms.
He mentioned one advertiser urged to him that Twitter ought to show an advert if a consumer mentions a product in tweet replies.
“I said, yeah, we should do that,” Musk mentioned.