From Twitter, they say that the fall in revenue that happened in this quarter is solely Elon Musk’s fault. The uncertainty of whether he will buy the social media company or not made its part and the stock market price and the revenue fell, as expected. Additional to this comes the weak advertising market, however, Elon Musk is a far bigger reason than that.
Twitter state that the company has a revenue of $1.2 billion until the 30th of June. That marks about a 1% fall, or a decline compared to last year.
Twitter blames Elon Musk For The Fall Of Revenue This Quarter
As they state, two main reasons are to blame for it. “advertising industry headwinds associated with the macroenvironment” and “uncertainty related to the pending acquisition of Twitter”.
Furthermore, from Twitter, they say that this is not the only damage that Musk has done to them. The cost of the negotiations and everything surrounding Musk’s bid cost them close to $33 million.
Like all the other social media platforms, Twitter makes its money mainly through advertisements. In Twitter’s case, almost 90% of the money generated by advertising come from the US. This is because the social media lacks popularity in other parts of the world. Moreover, according to the owner of Snapchat, the advertisement growth is substantially slowed down.
The daily active users are the ones that you can monetize. Investors are watching and following the number of active users closely and decide upon paying for an ad, or not, according to this only. Since the breaking of the deal with Musk was due to this exact reason, investors were more doubtful than ever on whether to advertise on Twitter or not.
However, from Twitter, they say that the number of monetizable users grew by 16%. Making 237.8 million daily active users.
“Twitter is now in the unenviable position of convincing advertisers that its ad business is solid regardless of how its court battle with Musk ends, and its Q2 earnings show that the platform has its work cut it out for it to do that.” – Jasmine Esberg, an analyst at the Insider Intelligence states.
Elon Musk had finally pulled out from the takeover deal. The main reason is the number of fake/spam accounts on the platform. However, Twitter has now issued a lawsuit against him. They demand Musk to proceed with the transaction as per the initial agreement and acquire the company.
The trial will take place in October, and has several possible outcomes. One of them is for the judge to order Musk to proceed with the deal and buy Twitter at the agreed price of $54 per share. This will cause Musk to overpay for the company since the shares are now fluctuating around $39.
“Twitter did not generate positive cash flow this quarter. In fact, Twitter burned almost $125m this quarter, versus generating $103m a year ago. Why does this matter? Because if the Musk deal does go through, Twitter will need to generate substantial cash to service, and eventually pay off, the massive amount of debt Elon plans to saddle it with.” – Drew Pascarella, a senior lecturer on finance at the Cornell University says.
