In a tweet Sunday, billionaire Elon Musk announced that Twitter still has negative cash flow due to a 50% decrease in Twitter ad revenue and the company’s significant debt load. In an interview with the BBC in April, Musk said that the company was “roughly breaking even,” and most of Twitter’s advertisers had returned. That does not seem to be the case now.

In the BBC interview, Musk said he had reduced non-debt expenses to $1.5 billion down from the projected $4.5 billion figure originally estimated. But Musk has annual interest payments of $1.5 billion from the debt he took on when buying Twitter for $44 billion last fall. Musk hoped to be profitable by the end of June.

“We could be profitable, or to be more precise, cash flow positive this quarter if things keep going well,” Musk said. “I think almost all advertisers have come back or said they are going to come back.”

From April 1 through the first week of May, Twitter’s advertising revenue was $88 million, a 59% decline year-over-year, reports The New York Times. In the past, advertising on Twitter has made up as much as 90% of the company’s revenue. Before Musk bought the social media platform, taking it private, Twitter said it planned to diversify revenue and lean into the subscription model. That was the strategy behind the Twitter Blue subscription. However, repeated changes to that subscription, including pricing and features, have dropped sign-ups, and subscription revenue isn’t reaching its potential.

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Usage is up 3.5%

In a tweet Friday, Musk posted user data for Twitter for the previous week. Overall, the platform’s usage increased 3.5% week-over-week. Japan had the highest usage for Twitter, followed by the EU and APAC. The US came in fourth in terms of usage.

Why advertisers are leaving Twitter

Since acquiring the social media platform last October, Musk made a number of questionable moves including bringing back banned users, firing sales executives and removing blue checkmarks randomly, causing advertisers to balk. Brands like General Motors and Volkswagen and some ad agencies are among those who paused their ad spending for a time on Twitter, says The Times. Others including Apple, Amazon and Disney have been spending less too.

According to Insider, Twitter is accepting advertising from industries it has not traditionally worked with including online gambling, fantasy sports betting, and cannabis products. Adult content is also allowed on Twitter, which some advertisers want to distance themselves from.

The Threads effect

While Meta-created competitor Threads has more than 100 million followers so far, the company has not yet introduced advertising to the platform. For now, that’s an attraction for new users, but it doesn’t offer advertisers a new outlet. They will have to find other avenues for their advertising dollars, and Twitter could potentially be the beneficiary.

Insider Take

Under Musk’s leadership, the social media platform has been a trainwreck. Every week seems to bring new drama, including pricing changes, new requirements, tweet limits, chaos surrounding the once-coveted blue checkmark, and more. It’s no wonder that advertisers want to distance themselves from Twitter right now, but we probably can’t blame their reticence entirely on Mr. Musk. The economy is likely playing a role too. Can Musk and his new CEO turn things around?

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