There are reports that Elon Musk will complete the acquisition of Twitter very soon. However, Twitter employees will not be all smiles when this happens. There are reports that Elon Musk plans to fire nearly 75% of Twitter’s employees. The company’s headcount will reduce to just over 2,000. However, there are reports that the layoff has nothing to do with Musk. Internal documents reveal that irrespective of the owner of Twitter, the company is likely to make large-scale layoffs in the next few months. This change could limit Twitter’s control of harmful content and data protection.
Elon Musk has reportedly told potential investors that 75% of employees will go. This will reduce Twitter’s workforce from 7,500 to just over 2,000. Twitter plans to cut employee salaries by about $800 million by the end of next year. This figure means that nearly a quarter of employees will leave. In addition, Twitter plans to slash infrastructure operating expenses. This includes the closure of some data centers serving more than 200 million users. This mass layoff also helps explain why Twitter management is eager to sell the company to Musk. For struggling companies, the $44 billion in acquisition funding is undoubtedly a relief. It will allow company management to avoid announcing layoffs themselves.
Layoffs will affect Twitter’s operation
Edwin Chen, a data scientist who worked on spam and health metrics on the Twitter platform, is now the CEO of content moderation startup, Surge AI. He claims that millions of users would immediately feel Twitter’s massive layoffs. Edwin Chen believes that Twitter has an overstaffing problem. However, Elon Musk’s layoffs are “unimaginable,” and would expose Twitter users to hacking risks. It will also expose users to all kinds of inappropriate content.
“It’s going to be a knock-on effect,” Edwin Chen said. “You’ll see service levels drop, and the people who stay don’t have the ability to restore service, and they’ll lose confidence completely and want to leave.”
Musk should close the deal to buy Twitter by next Friday. After months of legal wrangling, the two sides are clearly in good faith to move forward with the plan. Elon Musk would immediately be the new owner of Twitter.
“For Musk, buying Twitter was easy, fixing the platform was hard…The challenges will be daunting,” said Dan Ives, a financial analyst at investment bank Wedbush Securities.
Twitter denies layoff plans
Twitter executives have repeatedly told employees that the company has no immediate plans to lay off workers. In June, Musk was asked about layoffs at a Twitter all-hands meeting. Musk responded that he saw no reason to keep underperforming people at the company.
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As far as Elon Musk is concerned, once the acquisition is completed, layoffs will commence. His target will be how to make the long-struggling Twitter profitable. However, the layoffs underscore Musk’s extreme plans to complete the company’s transformation.
Twitter has never achieved the profit margins and scale that other social media platforms like Meta and Snap have. Musk’s plan is to take the company private so that it doesn’t have to please the market. This is the key reason why former CEO and co-founder Jack Dorsey backed Musk’s takeover.
The back-and-forth takeover deal has been a roller coaster ride for months. The two sides have gone to court and this has a toll on Twitter. The company experienced serious problems with employee turnover, slowing hiring, stalled projects, and stock price volatility. More recently, Andrea Walne, a general partner at the venture capital firm Manhattan Venture Partners, believes that Twitter is currently only worth $10 billion to $12 billion. Elon Musk himself believes that his investment in Twitter is too much.
Musk told investors that he plans to double Twitter’s revenue within three years. He also plans to triple the number of daily active users who watch ads over the same period. However, he did not reveal how he plans to achieve this.
Twitter currently estimates the number of profitable daily active users at 237.8 million. This is an increase of 16.6% compared to the same period last year. The company defines profitable daily active users as the number of users who see ads. But the figures listed in court filings are much lower as the two sides go through legal battles. Musk claims that, according to Twitter’s own data, fewer than 16 million users see the vast majority of ads. In addition, relevant sources reveal that the time these users browsed Twitter fell by 10% in 2021. It only recovered slightly in the first quarter of 2022.
Layoffs and rehiring some employees were an important part of Musk’s revamp of Twitter. Musk agrees that the company’s revenue does not justify the number of employees. This is in comparison to other tech companies.
Employee sack is the first step for Musk
Elon Musk told colleagues that he sees a significant streamlining of the company as the first step in executing a transformational strategy that includes bringing in more productive workers and innovative models that are profitable. Musk wants to expand into new services such as subscriptions. This will allow users to pay for exclusive content published by famous people, which he claims could bring in more revenue.
But Twitter’s own data found that the subscription business may not lead to a significant increase in revenue. That’s because the users who view the most ads on the platform are also the ones most likely to sign up for subscription services. If they start paying a monthly fee and stop showing ads when browsing content, it could actually hurt Twitter’s most profitable ad business right now.