Even if Musk’s deal with Twitter falls apart — and there’s little sign it will now — significant layoffs are expected: Twitter’s current management plans to cut the company’s salaries by about $800 million by the end of next year, a figure that means according to the company Documents and interviews with people familiar with the company’s deliberations, nearly a quarter of employees. The company also plans to slash its infrastructure, including the data centers that keep the website up and running for the more than 200 million users who log in every day.
The previously unreported cuts help explain why Twitter officials are eager to sell to Musk: Musk’s $44 billion bid, while hostile, is a golden ticket for the struggling company — possibly Helps its leadership avoid painful announcements: demoralizes employees and can paralyze them The service’s ability to combat misinformation, hate speech, and spam.
The impact of the layoffs could be felt immediately by millions of users, said Edwin Chen, a data scientist who worked on Twitter spam and health metrics and is now CEO of content moderation startup Surge AI. He said that while he thinks Twitter is overstaffed, Musk’s proposed cuts are “unimaginable” and would put Twitter users at risk of hacking and exposure to objectionable material such as child pornography.
“It’s going to be a cascading effect,” he said. “You’re going to have a drop in service, and people still don’t have the institutional knowledge to get them back, and are completely demoralized and want to leave themselves.”
Twitter’s lead attorney, Sean Edgett, issued a notice to all employees Thursday night, saying the company had not received any confirmation from Musk about his plans. Twitter’s own small “cost savings discussions” were put on hold once the merger agreement was signed, Edgett said.
In internal Slack groups, Twitter employees reacted to the news with anger and frustration, supporting each other and joking about the turmoil of the past few months, according to people familiar with the matter.
Twitter and Musk are expected to close the acquisition next Friday. After months of legal battles, plans to end the deal are apparently moving forward in good faith, said the people, who asked not to be named on the condition of anonymity to discuss internal deliberations. If the deal goes through, Musk will immediately become the new owner of Twitter.
Twitter did not immediately respond to a request for comment.
“It’s easy for Musk to buy Twitter, the hard part is fixing it,” said Dan Ives, a financial analyst at Wedbush Securities. “It will be a tough job to turn that around. challenges.”
Nell Minow, a corporate governance expert and vice-chairman of ValueEdge Advisors, said Musk could buy ambitious plans from potential investors, but would face challenges in implementing his proposals.
“He has to be able to justify what happens next if he makes those cuts?” she said. “What would he replace it with, AI?”
Company executives repeatedly told employees There are no immediate layoffs planned during the town hall meeting. In June, at a town hall he attended, Musk was asked a pointed question about layoffs. He replied that he saw no reason for underperforming people to remain employed.
But new details reflecting conversations over the past few months underscore the extreme nature of Musk’s planned transformation of Twitter to tackle the challenge of making the long-troubled company more profitable. Twitter has never reached the profit margins or scale of other social networking sites like Meta and Snap. Musk’s plan to take the company private — so that it doesn’t have to please Wall Street — is a key reason why former CEO and co-founder Jack Dorsey backed Musk’s bid.
Musk and his representatives did not respond to requests for comment.
The months-long roller-coaster saga of Musk’s on-and-off bid for ownership — coupled with a tense legal battle — has hit Twitter hard. It faces severe employee turnover, slowing hiring, stalled projects and volatile stock prices.
Recently, Andrea Vaughn, general partner at Manhattan Ventures, the firm that invested in the deal, told Business Insider that she thinks Twitter is only worth $10 billion to $12 billion, and that other partners are trying to get out. Musk himself said he and his investors “clearly overpaid for the site” during Tesla’s earnings call on Wednesday. Vaughan did not respond to a request for comment.
Musk has hinted that he will relax content moderation standards and favor reinstating the account of former President Donald Trump (on Tuesday, he posted a meme of himself that Kanye West and Trump each own or are buying for him) social media company holding a sword).
Musk told investors he plans to double revenue within three years and triple the number of daily users who can view ads during the same period, although he did not provide details on how those goals will be achieved.
Twitter estimated that its monetizable daily active users (MDAU), or the number of users eligible to see ads, was 237.8 million, up 16.6% from a year earlier. But documents appearing in the court battle between Twitter and Musk show that number is much lower, with Musk claiming that fewer than 16 million users saw the vast majority of ads, using Twitter’s own data.
Furthermore, according to interviews, the time these users spent browsing Twitter dropped by 10% during 2021, only to recover slightly in the first quarter of 2022.
Eliminate and then reshape the workforce by rehiring selected people Interviews and documents show that this is an important part of Musk’s ambitions. While Musk has previously said he’s open to layoffs — legal filings show he agrees with a friend’s text that the company’s headcount is not based on revenue compared to other tech companies — he hasn’t publicly provided specifics number.
In a presentation prepared for investors and other interested parties, Musk’s upbeat business forecast was driven in part by massive layoffs at the organization known as “bloat.”A potential investor, who asked not to be named, described Musk’s proposals candidly, likening them to Leveraged buyouts, where companies profit by slashing labor and operations.
But Musk told colleagues that he sees sharply downsizing the company as the first step in executing a turnaround strategy that then involves introducing More efficient workers and profitable innovation. These include expanding new services he claims could bring in more revenue, such as a subscription business where people pay to subscribe to exclusive content from powerful figures and influencers. (Twitter is currently experimenting with this model, called Twitter Blue).
But Twitter’s own data found that subscriptions may not lead to significant new revenue, According to interviews. That’s because the users who watch the most ads—roughly the top 1% of users in the U.S.—are also the ones most likely to sign up for subscription services. If they start paying monthly and have no ads, the plan could eat into the most lucrative part of Twitter’s current ad business.
Twitter’s headcount budget — about $1.5 billion last year — includes many well-paid ad salespeople and thousands of engineers. The company also spends hundreds of millions of dollars hiring contract companies that pay people to censor reports of hate speech, child sexual abuse and other ugly and rule-breaking content on the Internet. Median pay at Twitter — half earn more and half less — is about $240,000 for all employees and about $308,000 for engineers.
Some planned cuts were put on hold before the sale to Musk was announced in April.
The company is building a performance evaluation system called stack ranking this needs Managers rate employees on a numerical curve so that a certain percentage of employees will always be flagged as underperforming, according to a company document obtained by The Washington Post. The move was protested by employees, but Twitter said other tech companies did the same.
Twitter HR tells employees they have no plans Mass layoffs, but documents show plans for massive layoffs and infrastructure cost cuts were in place before Musk’s bid company. Musk will then build on those plans by first targeting underperformers — those whom the company’s HR system designates as “unhealthy” or accepting a 3 out of 5 — before moving on to other layoffs stage.
In the weeks leading up to the acquisition announcement, Musk and his lawyer, Alex Spiro, pitched elite investors in Silicon Valley and Wall Street for a deal that was touted as not just a performance revamp Bad Twitter, and can be with the famous Musk. Not all potential investors got the same details from Musk’s team.
Some of Musk’s biggest partners in the deal, including Oracle co-founder Larry Ellison and Sequoia Capital partner Doug Leone, are also Trump supporters and claim to be Musk’s pledge. Believers in the free speech ideology that brought back the platform. (Leone is no longer a Trump supporter, but is said to be open to free speech). Hedge fund manager Kenneth Griffin, the second-largest Republican donor in the current midterm cycle, also committed a smaller amount — under $20 million — to the deal, The Washington Post has learned. Ellison is $1 billion.
But many potential prominent funders passed.
Private equity giants T. Rowe Price, TPG and Warburg Pincus, which together control more than $1.4 trillion, have all decided not to invest after being approached by Musk’s representatives, according to people familiar with the matter.
Other prominent Silicon Valley heavyweights also disagreed. LinkedIn founder Reed Hoffman helped connect Musk with Microsoft CEO Satya Nadella as part of the fundraising process, but he decided not to invest in himself, according to people familiar with the matter. Hoffman was a major Democratic donor at a time when Musk was already talking about restoring Trump.
The Silicon Valley Ventures Founders Fund, founded by billionaire Republican donor Peter Thiel, also declined. Thiel first worked with Musk in 2000, when the two companies merged to form PayPal, and Thiel’s colleagues said he was a fan of Musk running Twitter.
It’s unclear if the parties didn’t embrace Musk’s lofty predictions or didn’t want to get involved in politics.
Some have passed after the company’s financials and Musk’s own woes started to look less attractive.
One disinterested person told The Washington Post that he was shocked after the market downturn and transaction costs began to take a toll on Musk’s finances and the crown jewel of his portfolio, Tesla.
It didn’t help that Musk ruthlessly attacked Twitter and its leadership after announcing the acquisition, driving down its stock price. Musk’s recent shift has only added to the confusion.
“[It’s] It’s like you buy a new car, you decide you don’t want it, and you crash it,” the person said. “Then you’re like ‘I’ll keep it. ‘”
Will Oremus contributed to this report.