Once a thriving social media platform, Twitter has been grappling with a series of obstacles in recent times.
The acquisition of Twitter by tech magnate Elon Musk in October 2022 was expected to breathe new life into the struggling company.
However, instead of experiencing a renaissance, Twitter has faced a decline in advertising revenue and other significant challenges.
This piece delves into the implications of Musk’s takeover, analyzing the factors contributing to Twitter’s struggles and examining whether these problems emerged before or after Musk assumed control
Dwindling Revenue
Twitter’s most pressing issue revolves around a substantial drop in advertising revenue. Since Musk’s acquisition, the company has witnessed a staggering 50% decrease in advertising earnings.
Musk himself has acknowledged the negative cash flow and stressed the importance of achieving positive cash flow before focusing on other areas.
The decline in ad revenue can be attributed to the “extreme pressure” exerted by advertisers in Europe and North America, who have seemingly attempted to push the company towards bankruptcy.
Layoffs
Elon Musk wasted no time implementing cost-cutting measures upon assuming control of Twitter. Approximately half of the company’s 7,500 employees were laid off as part of this strategy.
While these layoffs were aimed at reducing expenses, they also raised concerns about the platform’s ability to operate effectively with a significantly diminished workforce.
In February 2023, Twitter further exacerbated these concerns by laying off an additional 10% of its remaining staff, further impacting its operational capacity.
Emergence of Thread
Adding to Twitter’s woes is the emergence of competing platforms. Instagram’s introduction of the “Threads app” poses a potential threat to Twitter’s user base. With an estimated 150 million users, Threads leverages its connection to Instagram and Meta’s two billion users, presenting a formidable challenge to Twitter’s market share.
The migration of users to alternative platforms underscores the urgent need for Twitter to innovate and adapt to retain its audience.
Legal Battle with Meta
Elon Musk’s legal battle with Meta, the parent company of Instagram, has also hampered Twitter’s recovery efforts.
Musk has threatened to sue Meta over its new rival app, Threads, claiming that Meta has infringed on Twitter’s “intellectual property rights.” Twitter has expressed serious concerns about the alleged misappropriation of its trade secrets and intellectual property.
However, legal experts suggest that the cloning of social media platforms is a common practice in the industry, making it unlikely that the courts will favor Twitter’s claims.
Downward Valuation
Twitter’s financial performance has also suffered a severe blow since Musk’s acquisition. Initially purchased for $44 billion, Musk recently stated that the company’s value has plummeted to $20 billion.
Additionally, mutual funds giant Fidelity has valued Twitter at a mere $15 billion. These declining valuations reflect investor apprehensions regarding Twitter’s financial outlook and the effectiveness of Musk’s turnaround efforts.
While much of the focus has been on Twitter’s challenges following Elon Musk’s takeover, industry experts argue that the company was already grappling with difficulties before the acquisition.
Former executive Meghana Dhar, who has experience with rival platforms Snap and Meta, noted a steady decline in Twitter’s revenue and growth even before Musk’s involvement. This perspective raises questions about the underlying issues within Twitter’s business model and strategy.
Final Notes
In conclusion, despite Elon Musk’s efforts to revive the platform, Twitter continues to face significant obstacles.
The decline in advertising revenue, workforce reductions, competition from alternative platforms, and financial challenges have all contributed to Twitter’s current predicament.
Although Elon Musk’s acquisition has had a notable impact, indications suggest that Twitter was already encountering struggles before his involvement.
The future of Twitter remains uncertain, requiring innovative strategies and adaptability to regain stability in the highly competitive social media landscape.
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