Twitter still made $1 billion in revenue in the fourth quarter of 2022, The Information reports, citing insiders. In view of the destructive power with which Elon Musk is attacking his social network, this is a considerable amount of money. However, that is a good third less sales than in the fourth quarter of the previous year. Back then, Twitter set its revenue record of $1.57 billion in three months.
Daniel AJ Sokolov )
Daniel AJ Sokolov has been writing for heise online since 2002, initially from Vienna. Since 2012, as heise online’s North American correspondent, he has been trying to understand Canadians and Americans and make their nature understandable.
There is no more talk of that now. The current daily turnover is according to the source 40 percent below last year’s result. More than 500 top advertisers have halted their ads on Twitter, at least for now, after Elon Musk took over Twitter. As far as the big automakers are concerned, Musk had to foresee this: The corporations are not very keen on handing their own money to the majority owner of Tesla, the most valuable car company according to stock market speculation ratings, as long as they can achieve comparable advertising effects at similar prices elsewhere.
As for the rest of the paused advertisers, their withdrawal is a result of Musk’s decisions. He fired those responsible for security on the platform, abolished the advisory board and promised a new one, but then admitted that this promise was a lie.
Can be done as a private owner. But not if you want to boost advertising sales. They’re into Disney-esque feel-good environments; Seeing their baby formula or cruise touted alongside calls for violence or conspiracy tales rarely makes them reach for their wallets.
Purchase credit crushes Twitter
If Twitter were just a playground for a few super-rich like Elon Musk and co-investors like Larry Ellison and al-Walid ibn Talal Al Saud, it wouldn’t – financially – matter. However, the gentlemen only financed part of the massive takeover price of 44 billion US dollars (plus a few billion in expenses) themselves. At least $13 billion is coming from loans — and those loans were not taken by the new owners, but by Twitter, Inc., itself.
Sounds like the company is pulling itself out of the morass by its own shoelaces, but that’s not uncommon in the world of finance. Of course, this means that the company has to service this mountain of debt from now on. In the case of Twitter, that leads according to the Financial Times at interest rates of about $1.5 billion this year (or more if interest rates continue to rise, as is widely expected). This does not include repayment installments.
The problem: Twitter can’t afford it. Twitter couldn’t have afforded that even before the revenue slump. “Yes,” is heard again and again, “but Twitter was losing money before Musk. $221 million in 2021!” Twitter was doomed to financial ruin anyway, according to Musk fans in particular. If her idol might not be able to save the bird after all, he only hastened his swan song, but at least tried to save it.
The “Net Loss” Misconception
It is fundamental misunderstandings of accepted accounting principles that lead to such views. While it’s true that Twitter reported a net loss of around $221 million for 2021, that’s only true on paper; it doesn’t mean Twitter spent $221 million more than it earned. The net loss is relatively unimportant for the medium-term survival of the company.
In order to pay interest and other expenses, you need money. You have to be “liquid”. Liquidity is measured by cash flow. To put it simply, expenses are deducted from the income. Income can come from actual operations, from “investments” (interest on purchased bonds, speculation in securities, etc.) and from loans. If you just look at the income from operations, that’s what’s known as Operating Cash Flow in Denglish.
