Twitter blames Elon Musk and advertising slump for revenue shortfall

Twitter blamed falling digital ad spending and “uncertainty” on the social media company’s intermittent lawsuit by Elon Musk for lower second-quarter revenue.

The San Francisco-based group is seeking to enforce a $44 billion sale to Musk in a Delaware court, after Tesla’s chief executive suspended the deal in May and formally tried to walk out this month .

On Friday, reporting its three-month results to the end of June, the social media platform blamed turmoil around the potential takeover as one of the reasons revenue fell 1% to $1.18 billion.

Twitter said the lackluster results compared to the same period a year earlier reflected “advertising industry headwinds associated with the macro environment, as well as uncertainty related to Twitter’s impending acquisition by an Elon subsidiary. Musk”.

The numbers beat analysts’ expectations of an increase in revenue to $1.3 billion, according to data compiled by S&P Capital IQ. Twitter said that, at constant exchange rates, revenue increased 2%.

Twitter’s results come a day after social media rival Snap lost more than a quarter of its value after missing revenue and profit expectations, and announced plans to slow down hiring and to change its business strategy accordingly.

After a pandemic-related business revival, social media platforms have suffered as brands increasingly cut back on digital ad spend due to rising interest rates and inflation, coupled with market issues. the supply chain.

Twitter’s costs and expenses also rose, rising 31% to $1.52 billion, with more than $33 million spent on issues related to the Musk acquisition in the second quarter.

Severance costs were approximately $19 million during this period. The company went through a restructuring and announced that it would lay off a third of its talent acquisition team earlier this month.

The company’s net loss was $270 million, compared to net profit of $66 million in the same period last year.

Social media groups such as Twitter have also been hit by growing competition from apps, including viral video platform TikTok, and by Apple’s privacy changes that have made it harder to target advertising and measuring the success of campaigns ⁠— causing hiring freezes and cost-cutting measures.

Twitter’s monetizable daily active users (mDAU), its single metric to track its audience, stood at 237.8 million, above analysts’ estimates of 236 million. This included year-over-year user growth of 14.7% in the US and 17% in the rest of the world.

In its latest results in April, Twitter admitted to overestimating its viewership numbers by nearly 2 million users for about three years, due to what it called a “mistake”.

Twitter shares fell about 2% in premarket trading to $38.60, remaining well below the $54.20 per share price at which Musk originally agreed to buy the company.

Twitter is heading for a courtroom showdown with Musk, after the billionaire entrepreneur tried to terminate the deal, citing concerns about the number of fake accounts on the platform.

Twitter is suing Musk in Delaware Chancery court to force him to complete the deal, arguing that the world’s richest man repeatedly violated the merger agreement, such as by publicly disparaging the company over the platform itself.

“Twitter believes Mr. Musk’s alleged termination is invalid and abusive, and the merger agreement remains in effect,” the company said Friday.

Fake accounts or spam accounted for less than 5% of its mDAU during the quarter, the company added.

Twitter scored a mini-victory on Tuesday when the judge granted its request for an expedited trial, now scheduled for October, accusing Musk of “attempted sabotage” of the company and generating uncertainty that inflicted damages “on every hour of every day”. ”.

Given the deal, the company did not hold its usual analyst conference call or comment on the outlook.

“Twitter is in a kind of purgatory right now. The future of the company and the product is in question,” said Mike Proulx of technology research firm Forrester.

“Twitter now has an acquirer that doesn’t want it anymore, a CEO and board that wants to get rid of it, and an employee base that’s caught in the middle of it all as their morale plummets. ”

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