Some predicted an imminent death for Twitter. It's still here. Can Elon Musk keep it alive?
Mark Gollom | CBC News | Posted: February 20, 2023 9:00 AM | Last Updated: February 20, 2023
'Wouldn't wish that pain on anyone,' Musk recently tweeted about attempts to save Twitter
Back in mid-November, with reports of hundreds of Twitter employees fleeing the troubled social media company, there was speculation over whether the lights would soon be turned off at the offices of Elon Musk's $44-billion acquisition.
Months later, however, Twitter has so far defied those who were eulogizing the company, and it continues to chug along while still facing significant challenges.
"I think it's almost a 'crisis averted' [situation], is the best I'd characterize it, from where we were to where we are," said Wall Street tech analyst Daniel Ives.
However, Ives, who described the initial Twitter takeover period as "an absolute debacle," also cautioned that "there's clearly heavy lifting ahead."
"It's going to be an uphill battle to get to where Musk wants to get to," he said, but he's "slowly on the right path."
However, Jasmine Enberg, an analyst at Insider Intelligence, offered a somewhat more pessimistic outlook for Musk. By the end of 2024, Twitter will decline in monthly users worldwide by 32 million, her company has forecast.
"We didn't expect there to be a catastrophic event that ends Twitter, but rather a gradual erosion of the service that leads to a major loss in users," she said. "And that is what we're seeing play out now."
Musk himself acknowledged the challenges he's faced since purchasing the company back in October last year. In a recent tweet he admitted that the past few months were "extremely tough" which included saving Twitter from bankruptcy while balancing the duties of running his other companies, Tesla Inc. and SpaceX.
"Wouldn't wish that pain on anyone," he tweeted. "Twitter still has challenges, but is now trending to [break even] if we keep at it."
Predictions of Twitter's demise
Just a few months ago, following the resignations and firings of hundreds of Twitter workers, headlines blared about the impending end of Twitter.
"As Twitter's workforce crumbles, users are tweeting their eulogies for the platform," was one NPR headline.
"The weird sorrow of losing Twitter," Vox wrote.
In January, Standard Media Index, which covers advertising spending, reported that advertising spend on Twitter Inc dropped by 71 per cent in December. And 14 of the top 30 advertisers on Twitter stopped all advertising on the platform after Musk took charge on Oct. 27, according to the Pathmatics estimates, Reuters reported
Twitter's daily revenue was down 40% year-over-year in January 2023, according to tech newsletter Platformer, as reported by CNBC,
WATCH | Could Twitter shut down completely?:
Meanwhile, Twitter has faced lawsuits, accused of not paying vendors. It's also facing lawsuits for allegations of failure to pay rent at its California head office and offices in London, England.
But last month, Twitter made its first interest payment of about $300 million on its $13 billion US loan package to a group of banks, according to Reuters.
'Not as dire' as first thought
It was a significant measure, said Ives, in terms of showing that Twitter is dealing with its debt and that "this is not as dire as maybe first thought."
Ives also believes there's been a stabilization in terms of advertisers fleeing, and that cost-cutting has started to make an impact.
The company has gone from a trajectory of a $1.5 billion to $2 billion loss, to a potential break-even position into the second half of the year, he said.
Twitter has introduced a slew of initiatives to win back advertisers, offering some free ads, lifting a ban on political advertising and allowing companies greater control over the positioning of their ads. Musk has also attempted to grow revenue by rolling out the Twitter-verified blue check-mark as a paid service.
"They need to ramp up subscription growth. Engagement has been strong on the platform since October, but now it's about bringing advertisers on and the verified blue service having success there," Ives said.
On Saturday, a pop-up message warned Twitter users that they will lose the ability to secure their accounts via text message two-factor authentication unless they pay $8 a month to subscribe to Twitter Blue.
But generating revenue from users through premium subscriptions and memberships hasn't worked with other social media companies, said Andy Wu, an assistant professor of business administration at Harvard Business School.
For example, in the case of WhatsApp, those plans have generally been abandoned. As for LinkedIn, the premium memberships are not a significant portion of the business, Wu said.
"There's not many precedents to suggest that charging users in a social networking-based business is a viable path unless they make significant improvements in terms of the benefits that the paid users would be getting," Wu said.
He said Musk's broader vision of the company — building Twitter into a public town square and an open forum for free speech — may be incompatible with brand advertising and generating revenue.
"Musk's position on content moderation certainly has an adverse effect on advertiser interest in the company. And Twitter is a company that's particularly dependent on brand advertisers who are sensitive to that environment in which their advertising is placed."
If indeed Twitter is trending toward breaking even, it's due to the cost cutting and not yet due to the broader transformations of the company that Musk has pushed, Wu said.
Advertisers 'don't trust Musk'
Endberg said attracting advertisers is still a big challenge for Musk. Twitter has lost many of its trusted sales representatives, so advertisers who are still considering advertising on Twitter have little support, she said.
"I do think that the biggest problem right now for Twitter in terms of its revenue is that advertisers really don't trust Musk," she said. "I think the big picture here is that Musk gave advertisers a reason to leave Twitter."
WATCH | Hundreds of Twitter employees resign after Elon Musk's ultimatum:
Twitter's relative small user base means it hasn't been an integral part of most advertising or marketing plans and has been a platform that has long underperformed relative to its peers in social media, Endberg said.
"Advertisers were already rethinking their commitment to Twitter. They were slashing their budgets," she said.
"Given all of the controversies surrounding the deal, [Musk's] erratic behaviour, as well as all of the uncertainty and potential instability of the platform, I don't think it was a difficult decision for most advertisers to pause or pull ads from Twitter."
Still, Musk is that kind of generational entrepreneur who can't be counted out, Wu said.
"He has come from behind many, many times before and he comes from the kind of business where they blow up a $100 million rocket every month," Wu said, in reference to Musk's SpaceX rocket engineering company.
"I think, for someone who has to go through that kind of trial and error, this kind of challenge for Musk is doable."