Elon Musk Didn’t Care About Twitter Economics Before He Bought it, but He Cares a Lot Now

Last April, Tesla billionaire Elon Musk said he “didn’t care about the economics” of Twitter when he was jockeying to buy the platform but now that he owns it, he seems fixated on Twitter economics.

Musk shifts focus from future of civilization: Musk spoke about Twitter, where he has a large and loyal following, in lofty terms last spring. “This is just my strong, intuitive sense that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization,” Musk said during the TED2022 conference, when his $44 billion bid for the company was public but he hadn’t completed the purchase.

Musk borrowed $13 billion to partially fund his purchase of Twitter, which is believed to be the largest tech leveraged buy out ever. The future of civilization has fallen behind the estimated $1 billion in annual interest payments on the loan as his primary concern.

Musk seems to be waking up to fact that Twitter, while a prestigious social media platform, is not a lucrative company. According to the New York Times, the company has lost money eight of the last 10 years. Which you think would have been more of a concern during the due diligence phase of the deal, not just be in the news now.

Twitter economics, front and center

The numbers don’t seem to work: The Times further noted that Twitter had been paying $50 million annually in interest payments, but the company is saddled with the the new debt taken on in for Musk to complete the deal. Annual interest payments have shot up to about $1 billion a year, but last year Twitter only generated about $630 million in cash flow to meet its financial obligations.

The first cut is the deepest: Musk has been floating ideas for generating revenue but has first turned to the usual billionaire standby of laying off staff. Up to half of Twitter employees were unceremoniously laid off late last week. Last Thursday night and Friday morning, large swaths of Twitter’s staff learned they had been laid off.  Some staff reportedly received an email telling them they no longer had a job, while many figured it out because they had lost access to their Slack and email accounts.

Twitter staff who still have jobs probably won’t have much of a life outside of work for the foreseeable future. Musk has told Twitter employees to work 24/7 to generate revenue needed to to make the massive interest payments.

Will people pay for what has been free? Musk has been tossing revenue ideas against the wall to see what will stick. Mostly is has come down to charging people for what they have long enjoyed at not cost. That is no easy trick. Musk recently proposed charging $20 per month for the coveted blue check mark verification that many, but far from all, users enjoy. The objections were loud, and Musk announced that Twitter would begin charging $8 per month for verification.

“We need to pay the bills somehow!” he wrote in a tweet responding to complaints about the fee.

According to The New York Times, Musk and his advisers are considering adding a service that would allow users to send direct messages to high-profile users for a fee, “paywalled” videos, charging for user analytics and reviving the short-form video platform, Vine. How Twitter users receive the changes remains to be seen. If the new owners of a popular diner fired half the staff, raised the menu prices and then started charging for ketchup packets, would the customers get used to it or just start going somewhere else to eat?

Advertising used to be Twitter’s main revenue: Advertising was about 90 percent of Twitter’s revenue prior to Musk, but image conscious brands loath to be associated with racism and loony conspiracy theories are fleeing the platform. According to the Network Contagion Research Institute, an independent center that tracks online trend, there has been a 500 percent increase in racial slurs on Twitter just since Musk bought the platform. Many large brands have stopped, or at least paused, advertising on Twitter, leading to what Musk described as “a massive drop in revenue.” 

Elon Musk is likely to be long remembered as a genius, even a savior, for founding Tesla and popularizing electric cars when civilization urgently needed to stop using fossil fuels, but nobody is brilliant at everything. Twitter might be the test of whether Musk is as exceptional as his popular image portrays him, or just as human, albeit much richer, than the rest of us.