Since Elon Musk took over, Twitter has been hit by severe workforce reductions, an advertiser boycott, warnings of bankruptcy, and mass departures
Elon Musk’s reaction on Friday to the most recent wave of chaos to hit Twitter was to tweet a picture of the company’s logo put on top of a gravestone. Former Twitter staff are pondering if the issues at the company are indeed existential.
Since the Tesla chief executive bought Twitter in October, the company has been hit by severe workforce reductions, an advertiser boycott, warnings of bankruptcy, and now a mass departure among its remaining staff.
— Elon Musk (@elonmusk) November 18, 2022
No wonder the topics trending on Twitter this morning included #RIPTwitter and #TwitterMigration as the turmoil deepened.
Here we address some questions about the scale of the crisis.
How Many Employees Have Left Twitter?
Musk axed approximately 50% of the 7,500-strong workforce in the first week of this month, within days of taking over. This left roughly 3,750 workers. Overnight an undetermined number of those employees quit after Musk set them a 5 pm ET deadline on Thursday to take on “long hours at high intensity” and be “extremely hardcore” or else resign with three months’ severance pay.
According to one report, 75% chose severance, which would leave less than 1,000 employees at the company. The resignations have hit a range of departments, including the press team, which means questions about the scale of layoffs and the impact on the social media platform are now left unanswered. Instead, former employees are addressing the gaps.
Could Twitter Collapse?
Evidence on social media alludes to several engineers resigning in the wake of Musk’s ultimatum, despite Twitter’s new boss emphasizing that the new-look company would be “much more engineering-driven” under his ownership and that “those writing great code will constitute the majority of our team”.
There are now worries that the site will be vulnerable to bugs and technical failures, amid signs that the complex system supporting Twitter is already creaking. Two-factor authentication has already been hit and there have been problems with retweeting.
Steven Murdoch, a professor of security engineering at University College London, said the service might struggle to deal with “complex failures”, conduct manual maintenance, or address security threats. Simply replacing departed engineers will be hard.
“Twitter could try to hire new staff or retask existing staff, but getting up to speed about how the relevant systems work can take months, even with a smooth handover process. Every large website has developed its own unique system and anyone coming from outside will have a steep learning curve.”
Even before Musk took over, there had been signs of problems. Twitter’s former head of security, Peiter Zatko, has cautioned that information security standards were low. He worried Twitter could face an “Equifax-level” hack, pointing to the 2017 attack on a credit reporting company that exposed the data of 147 million people in the US.
Could Twitter Go Bust?
Musk cautioned this month the company could go bankrupt, saying without an increase in subscription revenue it might not weather the approaching recession.
Advertising makes up 90% of Twitter’s $5.1bn (£4.3bn) in annual revenue but that revenue source has been affected hard by a halt in spending by top clients including General Motors and the company behind the cereal brands Cheerios and Lucky Charms. Musk acknowledged that there had been a “massive drop” in ad revenue in the wake of the acquisition.
The financial problems – Twitter has suffered a loss for 10 of the past 12 years – have been intensified by a chaotic relaunch of the subscription service, Twitter Blue, which has been suspended after impersonators leaped at the offer to be “verified” by simply paying $7.99 per month.
Musk is the world’s wealthiest man and has the alternative of supporting any losses through his $178bn fortune. But he has already devoted billions of dollars of his own money – more than $30bn of equity including an existing stake in Twitter and $7bn of commitments from his associates – to the $44bn deal.
Drew Pascarella, a senior lecturer on finance at Cornell University, said:
Buy Crypto Now“Elon has the option to use his personal fortune to plug Twitter’s losses as he wishes to, provided that he has the funds available to do so. While that might not be fiscally responsible or attractive, he can do whatever he wants with his own money.”
What If Advertisers Do Not Return?
That would be very worrying for Twitter. The company has added about $13bn of debt to its balance sheet following the acquisition and it bears interest costs of about $1bn a year. One measure of a company’s capacity to cover those costs is its cash flow.
According to Twitter’s last batch of quarterly results as a listed company, Twitter generated negative free cash flow (spending more cash to run the business than it brings in) of about $124M.
Farhad Divecha, managing director of UK digital marketing agency Accuracast, said fears over “brand safety” on Twitter were already an area of interest among advertisers. Now they will be concerned about the quality of service they will be receiving from Twitter employees, he added.
He also said:
“Staff disfranchisement is obviously looking like a problem. And even if Elon didn’t want to negatively impact ad services, as the agency handling advertisers’ budgets, we are concerned about the quality of service we get from Twitter ad support and the account managers at Twitter who service our agency account and our clients’ accounts.”
