Even if Musk’s Twitter deal fails – and there are few indications now that it will – big cuts are expected: Twitter’s current management has planned to cut the company’s salaries by about $800 million by the end of next year, a number that could mean the departure of nearly a quarter of the workforce. , according to company documents and interviews with people familiar with the company’s deliberations. The company also planned to make major cuts to its infrastructure, including the data centers that keep the site working for the more than 200 million users who log on each day.
The scale of the cuts, previously unreported, helps explain why Twitter officials are so eager to sell to Musk: Musk’s $44 billion offer, while hostile, is a golden ticket for the struggling company — and potentially helping its leadership avoid painful ads that It would dampen the morale of the staff and might even be paralyzed The service’s ability to combat misinformation, hate speech and spam.
Edwin Chen, a data scientist who was formerly responsible for spam and health metrics on Twitter and is now CEO of content management startup Surge AI, said the impact of such layoffs is likely to be felt immediately by millions of users. He said that while he thought Twitter was overstaffed, The cuts proposed by Musk were “unthinkable” and would put Twitter users at risk of being hacked and exposed to offensive material such as child pornography.
“It’s going to be a cascading effect, where services will go down and people who don’t have the institutional knowledge to take it back, are just completely frustrated and want to quit,” he said.
On Thursday evening, Twitter’s chief attorney Sean Edget sent a message to all employees stating that the company had not received any confirmation from Musk about his plans. Edgett said, according to an email seen by The Post, that the smaller Twitter’s “cost-saving discussions” were put on hold once the merger agreement was signed.
In internal Slack groups, Twitter employees reacted to the news with anger and resignation, supporting each other and making jokes about the turmoil of the past few months, according to people familiar with the conversations.
Twitter and Musk are expected to close the purchase next Friday. Planning for the conclusion is moving forward in apparent good faith after months of legal battles, say people familiar with the negotiations who spoke on the condition of anonymity to discuss internal deliberations. If the deal closes, Musk will immediately become the new owner of Twitter.
Twitter did not immediately respond to a request for comment.
“The easy part for Musk is buying Twitter and the hard part is fixing it,” said Dan Ives, financial analyst at Wedbush Securities. “It would be an enormous challenge to change this situation.”
Neil Mino, a corporate governance expert and vice president of ValueEdge Advisors, said Musk was likely shopping ambitious plans for potential investors, but he would face challenges in implementing his proposals.
“He should be able to show if he’s going to make those cuts, what happens next?” She said. “What will replace it, artificial intelligence?”
Company executives repeatedly told employees There are no immediate plans to lay off during city council meetings. At the only town hall he attended, in June, Musk was asked explicitly about layoffs. He replied that he sees no reason why low performers should continue to work.
But the new details, which mirror conversations over the past few months, highlight the extreme nature of Musk’s planned turnaround on Twitter amid the challenge of making the long-struggling company more profitable. Twitter has never achieved the profit margins or scale of other social sites like Meta and Snap. Musk’s plan to make the company private – and free it from having to please Wall Street – was a major reason why former CEO and co-founder Jack Dorsey backed Musk’s offer.
Musk and his representatives did not respond to requests for comment.
The months-long rollercoaster saga of Musk’s recurring show once again for ownership – along with a tense legal battle – has left Twitter battered and bruised. They are facing huge attrition of workers, a hiring slowdown, stalled projects and volatile stock prices.
Andrea Walne, general partner at Manhattan Venture Partners, a company that invested in the deal, told Business Insider that she believes Twitter is worth no more than $10 billion to $12 billion and that other partners have been trying out. Musk himself said he and his investors were “clearly overpaying” for the site during a Tesla earnings call on Wednesday. Wall did not respond to requests for comment.
Musk suggested that he would relax the standards for moderating content and would prefer to get former President Donald Trump’s account back (on Tuesday he posted a meme about himself, Kanye West and Trump each wielding a sword for the social media company he owns or is in the process of buying).
Musk told investors that he plans to double revenue within three years, and triple the number of daily users who can view ads in the same period, though he gave scant details on how to achieve those goals.
Twitter estimates its monetized daily active users (MDAU), defined as the number of users eligible to view ads, at 237.8 million, an increase of 16.6 percent over the same quarter last year. But documents that emerged in Twitter’s court battle with Musk indicate much lower numbers, with Musk’s side claiming, using Twitter’s own data, that fewer than 16 million users see the vast majority of ads.
Moreover, the time spent by these users browsing Twitter decreased by 10 percent over the course of 2021 and recovered only slightly in the first quarter of 2022, according to the interviews.
Destroy the workforce and then reshape it by re-employing the selected people It is a large part of Musk’s ambitions, according to interviews and documents. Although Musk has previously indicated he would be open to cutting staff — legal filings show he agreed with a friend on the text that the company’s headcount was not justified by its revenue compared to other tech companies — he hasn’t provided specific numbers publicly.
In presentations prepared for investors and other interested parties, Musk’s optimistic business outlook was driven in part by sharp job cuts across the so-called “bloated” organization. One potential investor, who spoke on condition of anonymity to describe Musk’s proposals frankly, likened them to Takeovers, in which companies make profits through devastating cuts in labor and operations.
But Musk told colleagues he believes that drastically reducing the company’s size is the first step in implementing a transformation strategy that would then involve introducing More efficient workers and profitable innovations. These include the expansion of new services that he claimed could bring in more revenue, such as a subscription business where people pay to subscribe to exclusive content from influencers and influencers. (Twitter is currently experimenting with such a model called Twitter Blue.)
But Twitter’s own data has found that subscriptions may not bring in significant new revenue, According to the interviews. That’s because the users who see the most ads – roughly 1 percent of users in the US – are also the most likely to join the subscription service. If they start paying a monthly subscription and become ad-free, the software can break up the most lucrative part of the current Twitter advertising business.
Twitter’s headcount budget – about $1.5 billion last year – includes many highly paid ad sales reps and several thousand engineers. The company also spends hundreds of millions of contract companies paying people to review reports of hate speech, child sexual abuse, and obscene and anti-rule content online. Twitter’s average compensation — the point at which half earns more and the other half earns less — is about $240,000 for all employees and $308,000 for engineers.
Some of the planned cuts have been put on hold pending the sale to Musk, which was announced in April.
The company establishes a performance review system called stack order Requires Managers rank employees on a numerical curve, so that a specific percentage of workers are always marked as underperforming, according to a company document obtained by The Post. Employees protested the move, but Twitter says other tech companies have the same practices.
Twitter HR tell employees they don’t plan on it Mass layoffs, but documents show extensive plans to fire staff and cut infrastructure costs were already in place before Mask offered to buy. company. Musk then built on those plans by first targeting low performers — people rated “not on track” or people with a rating below 3 out of 5 — before moving on to other stages of downsizing.
For weeks before the acquisition was announced, Musk and his lawyer Alex Spiro pitched a crowd of elite Silicon Valley and Wall Street investors in a deal billed as an opportunity not just to change underperforming Twitter, but to work with the celebrated. musk. Not all potential investors have received the same details from Musk’s team.
Some of Musk’s biggest partners in the deal, including Oracle co-founder Larry Ellison and Sequoia partner Doug Leone, were also Trump supporters and believers in the kind of free-speech ideology that Musk promised to bring back into the platform. (Lyon is no longer a Trump supporter but is said to take an expanded view of free speech.) The Post has learned that hedge fund manager Kenneth Griffin, the Republican Party’s second-largest donor in the current midterm cycle, has also committed a smaller amount — less than $20 million compared to Ellison’s $1 billion — for the deal.
But several prominent potential financiers have passed.
Private equity giants T. Rowe Price, TPG and Warburg Pincus, which collectively control more than $1.4 trillion, decided not to invest after being contacted by Musk’s representatives, according to people familiar with the process.
Other notable companies in Silicon Valley also declined. LinkedIn founder Reid Hoffman helped connect Musk to Microsoft CEO Satya Nadella as part of the fundraising process, but decided against investing himself, according to people familiar with the situation. Hoffman is a major Democratic donor, and Musk at the time was already talking about getting Trump back.
Founders Fund, the investment firm Silicon Valley founded by billionaire Republican donor Peter Thiel, also said in the negative. Thiel first worked with Musk in 2000 when the two merged their companies to form PayPal, and Thiel’s associates said he’s a fan of Musk who runs Twitter.
It is unclear whether these parties did not agree to the noble overthrow of Musk, or did not want to get involved in politics.
Some died after the company’s finances became less attractive and Musk’s predicament became less attractive.
One of the people who lost interest told The Post he was concerned after the market slumped and the cost of the deal began to affect the finances of Musk and the crown jewel in his wallet, Tesla.
Musk didn’t help attack Twitter and lead it relentlessly after announcing his takeover, sending its stock price down. Musk’s recent change has heightened the sense of chaos.
“[It’s] “It’s like you bought a new car, decided you didn’t want it, and then crashed it,” the person said. Then you’re like ‘I’ll keep it.’ “
Will Orimos contributed to this report.
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