(notification whistles)
- [Reporter] This is why Twitter has $13 billion in new debt
that it took on at the end of 2022.
Elon Musk didn't start Twitter's problems.
It hadn't booked an annual profit since 2019,
but in the months after that tweet,
its finances have drained.
Revenue fell an estimated 40% year over year in December.
Still, Musk is projecting optimism.
- [Musk] I think we've got a shot
at being cash flow positive next quarter.
- [Reporter] But just how possible is that?
Let's look at Twitter's cash flow before
and after Musk's takeover to see how its revenue has changed
and why he insists Twitter will take flight again soon.
Twitter's cash flow problems started
before Musk's takeover of the company.
It had posted a loss in eight of the last 10 years.
- The last full year that we have figures for is 2021.
They booked about 5 billion in revenue
and also booked about 5.5 billion in costs,
which goes to show that the company's finances
even before the takeover were a little stressed.
- [Reporter] But for the money it was making,
it relied heavily on advertising.
Take a look at the second quarter of 2022.
Advertising accounted for more
than 90% of Twitter's revenue.
Fast forward to October
when Elon Musk purchased Twitter for $44 billion.
(Musk shouts)
That buy saddled the company with that $13 billion in debt.
Analysts estimated at the time that this would put Twitter
on the hook for annual interest payments
of more than $1 billion compared to 51 million in 2021.
- The debt is going to drain the company's resources.
He added a huge burden to the company's finances.
- [Reporter] Musk came in with big ideas for Twitter,
including cutting down its reliance on advertising revenue
and focusing on subscription services.
But one idea that he focused heavily on
was promoting what he refers to as free speech.
Musk began reinstating accounts
that had been banned for tweets that violated policies
and limiting content moderation.
- Twitter has become a little bit more of a chaotic platform
and place since Elon took over.
- [Reporter] Last year saw a slowdown in online marketing
that affected many platforms
due to people spending less time online
and broader economic concerns.
But Twitter had additional issues
because some of Musk's changes didn't sit well
with some big advertisers.
Within weeks of the takeover, companies including Chipotle
and United Airlines had pulled back
or paused their ad spending on the platform,
hurting Twitter's primary source of revenue.
- Advertisers are really focused on brand safety
so that when their ads appear online
or anywhere for that matter, they want want to know
that the content that it's surrounding
is not offensive or not inflammatory.
- [Reporter] Musk has said Twitter
must be a respectable platform for advertisers,
and Twitter says brand safety is a priority.
While advertisers fled,
Musk was taking stock of his new company.
He said in early November
that Twitter was losing $4 million a day.
- Because I'm just thinking about like, how do we...
I'm just like, you know,
just get Twitter to be in a financially healthy place.
- The main way that's being addressed,
we're told, is through cost cutting.
- [Reporter] Twitter went from about 8,000 employees
before the sale to around 2,000 in December,
but these job cuts have come with their own price.
- When you fire whole teams and take them off the site,
suddenly there are people who had expertise
in running a very complicated machine
that are not around anymore, and it's not a surprise
that there have been unexpected unplanned outages.
- [Reporter] Twitter hasn't said much about recent outages,
but the company responded
to a request for comment with this.
(message beeps)
Aside from cost cutting,
Twitter has made moves to grow revenue.
- Please subscribe to Twitter Verified, eight bucks,
and actually it's technically, it's 7.99, so slightly less.
- [Reporter] In December, it relaunched
its paid subscription service Twitter Blue.
As of March, it's estimated that the subscription service
has about 450,000 users according to Travis Brown,
a software developer who tracks social media platforms.
Now Twitter Blue is $11 for mobile phone users.
- We haven't seen a big uptake of Twitter Blue yet.
There aren't enough incentives yet
or reasons to join Twitter Blue to cause a mass signup.
- [Reporter] So Musk is also appealing to advertisers
to come back to the platform.
- [Musk] What I'd say to advertisers and brands is,
you know, use Twitter yourself
and believe what you see on Twitter
not what you read in the newspapers
'cause what you see on Twitter is the real thing
and what you read in newspapers is not.
- [Reporter] Currently, Musk says the company earns five
to six cents an hour spent by its users on the platform,
an amount Musk isn't satisfied with.
Still, he sees potential saying...
- [Musk] There will be a massive increase in revenue
because it is now useful.
- He sincerely believes that through targeted advertising
more specific forms of content instead of just general ads
for the public writ large,
advertisers will spend more because they feel
like they're reaching their target audience on Twitter.
- [Reporter] But are these efforts enough
to actually make that happen?
One analyst says the company could at least break even
in nine months based on estimates of recent cost cuts
and stabilizing ad revenue.
Twitter could also negotiate down its interest payments,
and Musk could contribute more of his personal wealth.
But whether the company books a profit
depends on what direction Musk takes.
- He wants to turn it into like an everything platform
where you can essentially integrate commercial activity
with reading the news, with talking to friends.
And I think that's the long-term vision,
but first he's gotta be sure that the company
can pay its bills, and that is still a bit in question.
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