Tech News

Can Twitter become profitable with Elon Musk at the helm?

Since its listing on the stock market in 2013Twitter was only profitable sporadically. Does his purchase by Elon Musk offer more positive financial prospects for the social network?

[article_mb_code]

In mid-April, the billionaire stated during an interview at the Ted2022 conference that his decision to buy the company was not financially motivated. “It is not a way to make money”, held Tesla’s number one. “I just have a strong intuition that having a platform public Y open to the largest number of people is extremely important for the future of our civilization,” he said.

On the New York Stock Exchange, for just under 9 years, Twitter had losses every year, with the exception of 2018 and 2019when the group obtained something more than 1,000 million dollars of profit.

[article_mb_code]

Bought by Musk for $44 billion. is a small company compared to Facebook, whose market capitalization is more than 500,000 million dollars. Twitter’s revenues mostly come from advertising, but the platform doesn’t attract enough Internet users to earn significant revenue.

At the end of 2021, Twitter had 217 million users”monetizable”, that is, exposed to advertising on the platform, far from the almost 2 billion of Facebook users.

[article_mb_code]

Twitter will publish its first-quarter results on Thursday. Wall Street forecasts an earnings per share of three cents and a turnover of 1.2 billion dollars.

Financing

Although profitability does not seem to be the priority of Elon Musk, the richest man in the world will seek at least not lose moneyin particular because part of the purchase will be financed with own funds.

[article_mb_code]

In a document presented to the stock market authorities last week, the businessman said he had 46.5 billion dollars: 21 billion of his personal fortune and the rest of loans from the Morgan Stanley bank and a banking group made up of Société Générale and BNP Paribas.

Musk has not detailed how he plans to increase Twitter’s turnover, except for a tweet in which he suggests lowering the price of the paid version of the network, Twitter Blue, currently at $2.99 ​​per month; grant a certified account to paying subscribers and suppress advertising for those users. He later withdrew this message.

Another path would be to reduce the number of Twitter employees, which could go hand in hand with his desire to ease content moderation on the platform.

At the end of 2021, the Californian group had 7,500 employees worldwide. According to a study by the New York University Business School, Twitter employed in 2020 about 1,500 moderators.

It could also look to increase user growth and ad revenue, or add new paid features to the platform.

“He has his own plan in mind,” says Angelo Zino, an analyst at CFRA. “If you can implement a model with subscription offers, while keeping the free options, it could work,” he added.

Indebtedness

By financing an important part of the purchase with credits, Musk will raise Twitter’s debt level.

The financial rating agency S&P stated on Monday that could lower the social network’s credit rating several steps, currently at BB+, and put it on a negative outlook.

For Zino, the main question is not so much Twitter’s debt but how Musk’s personal contribution will be realized.

The millionaire could associate with other investors so as not to compromise only with his fortune.

“If he manages to incorporate other bright spirits” into the company “it will probably increase his chances of success”, Zino concluded.

(With information from AFP / by Daniel Hoffman)

:

Tags
Back to top button