Why Elon Musk Desperately Wants Twitter to Make Money?
Musk’s plan for paid Twitter verification stem from a bigger problem.
It has already been 6 days, and the changes at Twitter are coming in fast. The billionaire has already suggested laying off a big chunk of the workforce at Twitter. Somewhere around 50 – 75 percent of the staff at Twitter can be laid off depending on the reports.
Elon Musk’s Twitter verification plan
Elon Musk has decided to establish an entirely new tier for users, which will require them to pay $8 per month. Previously, it was hinted that the price would be $20 but it was faced with a lot of public criticism and backlash.
The $8 package will allow users the verification sign and will give algorithmic boosts on the platform. Along with that, a paywall feature has also been suggested. Rumors suggest that a direct messages feature might also be included in the paywall.
The ideas at Twitter headquarters are pouring in fast. Hence, it is becoming quite difficult for the general public to keep a track of them all. Nevertheless, the theme is quite straightforward. Elon Musk wants Twitter to make a lot of money really fast.
Without a doubt, the ideas and suggestions that we have heard are quite haphazard. However, the theme is consistent. The platform wants to make money and desperately wants to cut its costs. After all, Elon Musk has already hinted that Twitter cannot survive off advertisement revenues alone.
This is a prime example of desperation to improve the balance sheet of a company and to be willing to go to any lengths to achieve that. This might seem unexpected. After all, Elon Musk insisted a lot in public before that the buyout of Twitter is more than just about money. For instance, back in April during a TED interview, the billionaire stated that “This is not a way to make money…. Having a platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. This is not about the economics at all.”
Nevertheless, the interview was taken at a time when Elon Musk had not seen the revenue sheets of Twitter. The billionaire then tried to wriggle out of it over the next six months. However, eventually, he decided to take the deal. But it is clear that his views have definitely changed a lot.
Furthermore, it makes sense why a new CEO would panic about the balance sheet of his company. Twitter had a $344 million loss in the previous quarterly earnings right before it got acquired. The users have been somewhat stagnant with no new growth. At the same time, the investors are quite pessimistic about the overall look of the company. That is one of the main reasons why Elon Musk was able to take over the platform.
Now the company has a debt of billions of dollars. This means that the problem of low revenue is more urgent than it previously seemed. Against the company, Elon Musk had to take loans worth $13 billion. This means that the company will have to pay significant annual interest rates.
So, the path to profitability for the company is looking significantly steeper. At the same time, Twitter’s ad business has been its main revenue source. However, it had looked much shakier since April when Elon Musk first proposed a deal. Back in the summer, ad spending significantly declined. This is the one theme that is also common across companies like Google and Facebook, as they can all feel the digital markets slowly dying up.
This means that there is a need for the company to take money from different sources very urgently. Musk has an ambitious plan that will require users to pay $8 per month. However, even if all of the 400,000 verified Twitter accounts agreed to pay $8 per month, it would generate only $38 million per year. That is just a fraction of all the interest that the company must give against its loans, which is approximately going to be $1 billion per year.
Of course, this is not how the entire acquisition should have worked. Nevertheless, Elon Musk has big ideas about the way Twitter should run. He is wildly rich, but we all know that even the crazy rich can sometimes overextend themselves greatly and make the wrong choices.
Share this on social media
