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Twitter could struggle financially If Musk’s plans go wrong

Few people are considered as controversial as Elon Musk is in our contemporary times

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Few people are considered as controversial as Elon Musk is in our contemporary times. Again, he has become the main person under the spotlight after his acquisition of Twitter, the big social media company. Musk had tried to back out of the deal earlier, but eventually came to the conclusion that he would be forced to acquire it by a court order anyhow. The price tag of $44 billion was huge, and analysts believe that Twitter isn’t in fact worth so much. Now that Musk is in charge of the company, the next stage of its history begins.

Blue Twitter chip for $8

The most salient decision by Musk thus far has been to turn the verification badge of Twitter into a commodity. The price is $8 (after being discounted from $20 following outrage from some celebrities like Stephen King). People objected, but Musk held his ground and started posting memes making fun of people who opposed the decision, going as far as to compare the Twitter blue mark with coffee. Clearly, Musk’s main concern is revenues at this stage, as he wants to reduce reliance on advertisements for positive cash flow, but is this really a good strategy?

There are opponents and proponents. Proponents say that under the previous scheme before Musk took over, the users were the commodities (or the product) and so now they no longer are. This argument does not stand against scrutiny, however. Users who do not pay for the blue chip are still the “product”. Moreover, Musk never said that he would eliminate advertisements entirely on the platform.

Opponents make more sense. They say that now anyone can pay $8 to be verified. That indeed happened and it cost investors billions of Dollars. An account on Twitter bought the blue check mark and pretended to speak for Elly Lilly, the pharmaceuticals company that produces insulin. The fake account tweeted that Insulin was now free, causing a drop in the stock price of the actual company and wiping billions of Dollars from its market value. This is Musk’s doing.

Moreover, it is unlikely that the $8 subscription fee will help Twitter given its current situation. Even though buying and selling Twitter’s shares has been suspended as the company has not gone private, investors can trade other good shares like Amazon and Apple with a reputable broker like easyMarkets, where they can build a portfolio of share CFDs easily.

Twitter’s big bills

Besides the fact that the company was overpriced, Twitter still has other issues to deal with. The acquisition was financed in part by debt from banks. The interest payment on the approximately $13 billion in debt is estimated to be around $1 billion annually. For Twitter to pay this interest payment through subscriptions, 10.4 million users would have to subscribe. The number of accounts with a blue check mark is currently around 400,000, and they get it free of charge. Musk’s plan falls short, and it won’t be enough to cover Twitter’s obligations, let alone be profitable.

Summary

Musk said it himself. He currently has too much on his plate. In a sense, he bit off more than he could shew. Things are not going great for him, and he needs to come up with solutions quickly if he is to save the social media company, which he himself said could go bankrupt.

 

 

 

 

 

 

(Above mentioned article is a sponsored feature, This article is a paid publication and does not have journalistic/editorial involvement of IDPL, and IDPL claims no responsibility whatsoever)

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