Lower costs and lower revenue – problem not (yet) solved at Twitter

An interesting article about Elon Musk’s takeover of Twitter, based on interviews with Twitter insiders. According to CNBC the number of Twitter employees is now about 1,300, down from about 7,500 before the acquisition. Elon Musk says it is about 2,300 (both numbers exclude contractors, of which there are many not least moderation/support).

Other reports say Twitter has lost 40 % of its revenue compared to the same period in 2021.

I’m following the development primarily looking for learnings about two things.

Is there a general learning about a better trade-off staffing/revenue growth/profitability for consumer Internet companies with revenues from a billion dollars up to 20 billion dollars? I’m not sure, but it definitely could be one with less staff/slightly lower revenue growth/higher profit margins.

Will Twitter’s approach work for Twitter? On the cost cutting/layoffs side it seems to work from the point-of-view that the service is operating day-to-day. But the way layoffs has been done at Twitter seems to be a major reason to why advertisers are not spending as much. With the service operating at the same scale in terms of users, a 40 % drop in revenue should not happen at Twitter’s scale.

So while lower run-rate costs is a good thing, it looks like it would have been better business to implement the cost cuts in way that didn’t scare advertisers.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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