Twitter revenue, profit fall by 40% in December 2022. Why?

March 6, 2023  14:49

Twitter's revenue and adjusted profit fell by 40% in December 2022. One of the main reasons is that many large advertisers left this social media platform after it was acquired by Elon Musk.

As the Wall Street Journal writes, since his acquisition of Twitter, Musk has been trying to stabilize the financial situation of the company. However, this social media platform's debt complicates the situation. Twitter was bought for $44 billion, but Musk and other shareholders lacked $12.5 billion to fully cover the company's expenses; so, they had to borrow the missing amount at a fairly high interest rate. At the beginning of the year, the company had to make the first payment of this loan, in the amount of about $300 million. According to the media, annual interest payments on the company's loans exceed $1 billion.

In 2021, 90% of Twitter's revenue came from advertising. However, after acquiring this social media platform, Musk's controversial behavior drove many advertisers away from the company. Twitter's ad spending, according to the Standard Media Index (SMI), fell 55% year-over-year in November 2022 and nearly 71% in December—and despite the fact that companies usually increase their advertising budgets on New Year's Eve.

As of January of this year, about 625 of the top 1,000 Twitter advertisers have stopped advertising on this social media platform. These included major brands such as Coca-Cola, Unilever, Jeep, Wells Fargo, and Merck. Due to the departure of advertisers, Twitter’s monthly income from advertising decreased by more than 60% from October to January 25—from about $127 million to $48 million.

Some major advertisers eventually returned, however. For example, Apple and Amazon have completely restarted buying ads on Twitter. Of course, so far this has not particularly affected the financial condition of this social media platform.

Previously, Twitter generated about $4.5 billion in annual advertising revenue. How much the company currently receives from advertising is not yet known; but judging by the noticeable reduction in income and revenue, it is much less.

The new owner of Twitter planned to increase the company's income through a paid subscription to Twitter Blue. It was possible to launch it only after several attempts, in December 2022. In one month, the number of Twitter Blue subscribers was about 290,000. It is still difficult to say whether these subscriptions can help improve the company's financial situation.

Massive layoffs at the company were also perhaps supposed to help save Twitter from bankruptcy. Musk himself claims that the company has already been saved from bankruptcy.

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