Elon Musk has owned Twitter for less than a week, and already the company is bleeding money.
Since the billionaire’s purchase of Twitter, dozens of celebrities and advertisers have said they’re not sure they’ll remain on the social media platform—leading Musk to propose a bizarre new plan for users to pay for verification badges.
“We need to pay the bills somehow! Twitter cannot rely entirely on advertisers,” Musk tweeted Monday after novelist Stephen King dismissed the notion of paying for Twitter verification. “How about $8 [a month]?” Musk asked, seemingly bartering a paid contract in a tweet.
The truth is Twitter is a financial time-bomb.
Musk’s $44 billion deal placed about $13 billion worth of debt onto Twitter. Any cash will likely need to help service that debt, but that cash is looking less and less available.
On Tuesday, advertising giant Interpublic Group recommended its clients (including Coca-Cola, Johnson & Johnson, and Spotify) to temporarily pause activity on Twitter. That recommendation follows an announcement from General Motors last week that it would be suspending advertising until it gets a better idea what direction Twitter is going in.
HBO, among Twitter’s top five advertisers this year, “will be assessing the platform under its new leadership,” before determining next steps. About a dozen clients of advertising agency GroupM threaten to pause all their Twitter ads if former President Donald Trump’s account is reinstated, as some fear Musk may allow.
Given that about 90 percent of Twitter’s revenue comes from advertising, Musk is now haphazardly pushing to make Twitter a subscription service.
On Monday, he tweeted details of his vision. Along with gaining verification, paying $8 per month would apparently show users half as many ads. Again, ads are the biggest source of Twitter’s revenue. A service only a select few would subscribe to—and cutting ad revenue generated by those users in half—wouldn’t balance potential losses if the plan goes awry and disillusions advertisers.
Meanwhile, Musk’s own actions are betraying his statement that Twitter will be “warm and welcoming to all.”
On Tuesday, Musk unilaterally unbanned far-right conspiracy theorist Mark Finchem to appease complaints from online right-wingers. Finchem, who has disputed the 2020 election results and is running to oversee voting in Arizona, is a proud member of the Oath Keepers.