- Tech billionaire Elon Musk did not rule out Twitter bankruptcy during a speech to employees.
- Two weeks ago, Musk began transforming the short messaging service.
- Now there are problems with fake accounts, a drop in sales, departures from the executive floor and a sharp warning from the US consumer protection agency.
Elon Musk is not known for his soft tones. And so his takeover of Twitter two weeks ago didn’t start quietly. Meanwhile, the short message service is in serious turmoil.
Assigning verification ticks to subscription customers without review created chaos with fake accounts that looked deceptively real. The US consumer protection agency FTC then sent an unusually sharp warning to Twitter. Other top managers in key positions left the company.
The perils of the billion hole
Musk warned employees that Twitter’s balance sheet could face a billion-dollar hole next year. Under these circumstances, if it is not possible to bring in more money than is spent, “bankruptcy cannot be ruled out,” Musk quoted the Bloomberg financial service as well as the tech media “The Information” and “Platformer.”
Twitter with declining revenue
The tech billionaire and CEO of Tesla bought Twitter for $44 billion. The service was already in the red before the takeover.
After the deal, Musk complained about a drop in sales as some major advertisers placed ads on the platform. They fear that if Musk relaxes the content rules as announced, their ads could appear next to inappropriate tweets.
The loan of around 13 billion dollars, which Musk took out for the purchase, also weighs on Twitter. According to media reports, servicing this debt costs around one billion dollars a year.
The tech billionaire wants to supplement advertising revenue, which has so far accounted for 90 percent of revenue, with subscriptions. The launch of its new subscription with verification ticks initially caused chaos as some users impersonated celebrities and companies with fake accounts. So far, Twitter ticks have been vetted and awarded to celebrities, politicians, and corporations. Under the new system, anyone who pays $8 a month for a subscription will get a tick.
Issue: Check tags for unverified profiles
No identity verification is performed on accounts. The tick looks the same in both cases. Whether you are dealing with an earlier, truly verified account or a newly purchased tick, you can only find out from the text after clicking on the symbol.
On Friday night, an additional gray tick marked “Official” appeared on previously verified profiles. Musk halted the token’s launch mid-week.
As an additional measure, Musk announced that accounts that want to impersonate others will have to use the word “parody” directly in their name. But the problem with fake accounts wasn’t that there weren’t any rules against them, it was that they couldn’t be detected and deleted quickly enough—and yet they had verification pipes.
The US Consumer Protection Agency warned
“We are following the latest developments on Twitter with great concern,” an FTC spokesman said Thursday. No company or its boss is above the law. Following earlier FTC violations, Twitter has pledged, among other things, to test new features for data protection and security before they are rolled out.
According to media reports, Musk assured employees in an email after the FTC warning that Twitter would do everything it could to honor the agreement with the agency. The FTC can impose large penalties. According to their investigation, Facebook paid five billion dollars in 2019.
Last week, Musk canceled roughly every second of the approximately 7,500 jobs on Twitter. According to reports, he now said the company was still overstaffed in some cases. Other key executives left the company on Thursday: Yoel Roth, who was responsible for filtering objectionable content, and Lea Kissner, head of information security. According to media reports, Robin Wheeler, who was recently responsible for advertiser relations, resigned, but Musk convinced her to stay. She tweeted that she was still at it.