The changes have been rapid since Musk took ownership of the company. He wants to lay off between 50 percent and 75 percent of the company's staff. He has established a new user tier in which users will pay $8 a month to get the prestige of verification and a boost to their ranking. There are rumors of a plan for paid direct messages, as well as a proposal for a paywall for videos.
It is difficult to keep track of all the ideas that have come so quickly. If you take a few steps back, you can see that there is a fairly straightforward theme. The ideas have been inconsistent, but they have sought new sources of non-advertising revenue and desperately cut costs.
This is the kind of thing you do when you want to improve your company's balance sheet and you're willing to look at anything.
Musk spent a lot of time telling the truth about the reason for the buy out. He stated in an interview that this is not a way to make money. It is very important to have a platform that is broadly inclusive. It's not about economics at all.
He was able to get a closer look at the company's books after he said this. He tried to wriggle out of the deal after that. His thinking has changed even if he came into the deal with altruistic motives.
Rich people can extend themselves.
There are a number of reasons why a CEO might be concerned about the company's balance sheet. Before the acquisition, the company posted a loss of 347 million dollars. With users stagnant, investors became less optimistic about the platform's financial outlook. The price was so low that Musk was able to take over.
Billions of dollars in debt have been added to the company's balance sheet by Musk. Musk took out loans against the company in order to finance the deal. According to DealBook, that raises the company's annual interest payments to roughly $1 billion a year. There was a path to profitability before the takeover.
Since Musk proposed the deal in April, the company's ad business has become less profitable. Even more established companies are feeling the pinch as digital markets dry up. In the wake of Musk's takeover, a number of major ad agencies have advised clients to stop advertising on the site, either because of the sudden chaos or a combination of the two. Musk has tried to shore up advertiser support by publishing an open letter to assure them that the platform would not become a free-for-all hellscape.
There is an urgent need to make money from sources other than advertising, but what has been proposed so far doesn't come close to filling the gap A new $8-a-month verification scheme is one of the most ambitious plans by Musk. Even if every single verified account signed up for the plan, it would only generate $38 million a year, a fraction of the $1 billion interest payments owed by the company.
It wasn't supposed to work this way. The point of buying the company was to try Musk's ideas out, even if you disagree with him. He spent tens of billions of dollars to keep public markets from knowing about his wealth. Private companies can go bust just as easily as public ones. If his first week on the job is any indication, he is more aware of that possibility now than he was before.
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