After Twitter reportedly posted a 40% year-over-year drop in advertising revenue and adjusted earnings for December, billionaire CEO Elon Musk expressed optimism that the company is on track to be cash-flow positive.
Musk gave a presentation on Twitter 2.0 to the Morgan Stanley Tech, Media and Telecommunications Conference in San Francisco on Tuesday, where he discussed what the company must do to recover and improve its revenue intake and outlined his grand vision for the platform. His long-term goal is to transform Twitter into the “everything app,” guided by the simple idea that making the app more useful will encourage more people to use it.
It starts with advertising. “We need to actually serve ads that are relevant and useful,” Musk said, acknowledging that the company has so far poorly monetized its estimated 120-130 million “hours per day of human attention on Twitter.”
Musk said Twitter currently makes “about five or six cents” per hour of user activity. He predicted that If Twitter successfully increases the relevance of its ads, the company could earn as much as 25 cents per hour.
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“The advertising relevance is the most gigantic thing,” Musk said. “And this is going to sound totally bizarre, but Twitter did not consider relevance in advertising until three months ago.”
Irrelevant advertising wastes people’s time, Musk said. His company aims to improve its keyword targeting and give advertisers the ability to highlight their content within related discussions on Twitter.
“Going forward, Twitter will have very relevant, useful advertising,” he continued. “And because it is useful, because it is relevant, there will be a massive increase in revenue, because it is now useful. So I’m very optimistic about the future. It’s been a very difficult four months, but I’m optimistic about the future.”
By cutting costs – including with widespread layoffs – and improving the user experience, the Twitter chief said his company should break even in the second quarter and has “got a shot at being cash flow positive next quarter,” though he doesn’t want to “count chickens before they hatch.”
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However, Twitter faces several challenges it must resolve before Musk’s aspirations can become reality. The company faces lawsuits for allegedly not paying rent on its offices and other unpaid bills, totaling more than $14 million in claims from at least nine lawsuits, according to the Wall Street Journal.
The app has also been plagued by glitches and outages, the most recent of which shut Twitter down for more than an hour on Monday.
Musk said Twitter’s complicated code base was to blame for the problems.
“The code base is like a Rube Goldberg machine, and when you zoom in on one part of the Rube Goldberg machine, there’s another Rube Goldberg machine, and then there’s another one,” Musk told the conference. “So it’s quite difficult to keep this thing running, and then also difficult to advance the product because it is really overly complex, to say the least.”
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“We’ll make a change, what appears to be a small change somewhere, that then causes a massive disruption,” he added. Addressing Monday’s outage, Musk said “what was supposed to be a small change to 1% of the Twitter user base ended up being a catastrophic change to 100% of the Twitter user base.”
Concluding on a positive note, Musk said his long-term goal for Twitter was to become the “everything app” by implementing direct payments between users to “create a very powerful financial experience.”
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“Basically, PayPal is kind of like a halfway version of what I think could be done in payments and finance. So, let’s say you want to be able to send money easily from one account on Twitter to another account effortlessly, with one click, you want to be able to earn interest on that money, you want to be able to have debt, so you can let your interest go negative,” Musk said.
“Basically, I think it’s possible to become the biggest financial institution in the world, just by providing people with convenient payment options. We don’t have the time to go into it in detail here, but if we just make the app more and more useful, people will use it more, and it’ll be great.”