<\/p>\n
Twitter\u2019s workforce is likely to be hit with massive cuts in the coming months, no matter who owns the company, interviews and documents obtained by The Washington Post show, a change likely to have major impact on its ability to control harmful content and prevent data security crises.<\/p>\n
Elon Musk told prospective investors in his deal to buy the company that he planned to get rid of nearly 75% of Twitter\u2019s 7,500 workers, whittling the company down to a skeleton staff of just over 2,000.<\/p>\n
Even if Musk\u2019s Twitter deal falls through \u2013 and there\u2019s little indication now that it will \u2013 big cuts are expected: Twitter\u2019s current management planned to pare the company\u2019s payroll by about $800 million (R14.68 billion) by the end of next year, a number that would mean the departure of nearly a quarter of the workforce, according to corporate documents and interviews with people familiar with the company\u2019s deliberations. <\/p>\n
The company also planned to make major cuts to its infrastructure, including data centres that keep the site functioning for more than 200 million users that log on each day.<\/p>\n
The extent of the cuts, which have not been previously reported, helps explain why Twitter officials were eager to sell to Musk: Musk\u2019s $44 billion bid, though hostile, is a golden ticket for the struggling company \u2013 potentially helping its leadership avoid painful announcements that would have demoralised the staff and possibly crippled the service\u2019s ability to combat misinformation, hate speech and spam.<\/p>\n
The impact of such lay-offs would likely be immediately felt by millions of users, said Edwin Chen, a data scientist formerly in charge of Twitter\u2019s spam and health metrics and now CEO of the content-moderation start-up Surge AI. <\/p>\n
He said that while he believed Twitter was overstaffed, the cuts Musk proposed were \u201cunimaginable\u201d and would put Twitter\u2019s users at risk of hacks and exposure to offensive material such as child pornography.<\/p>\n
\u201cIt would be a cascading effect,\u201d he said, \u201cwhere you\u2019d have services going down and the people remaining not having the institutional knowledge to get them back up, and being completely demoralized and wanting to leave themselves.\u201d<\/p>\n
Twitter and Musk are expected to close the purchase by next Friday. Planning for the closing 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 would immediately become Twitter\u2019s new owner.<\/p>\n
Twitter did not immediately respond to request for comment.<\/p>\n
\u201cThe easy part for Musk was buying Twitter, and the hard part is fixing it,\u201d said Dan Ives, a financial analyst with Wedbush Securities. \u201cIt will be a herculean challenge to turn this around.\u201d<\/p>\n
Nell Minow, a corporate governance expert who is vice chair of ValueEdge Advisors, said Musk was likely shopping ambitious plans to potential investors but will face challenges in implementing his proposals.<\/p>\n
\u201cHe\u2019s got to be able to show if he makes those cuts. What happens next?\u201d she said. \u201cWhat\u2019s he gonna replace it with, AI?\u201d<\/p>\n
Company executives have repeatedly told employees that there are no immediate lay-off plans during town hall meetings. In the one town hall meeting that he attended in June, Musk was pointedly asked a question about lay-offs. He answered that he didn\u2019t see a reason why low performers should remain employed.<\/p>\n
But the new details, which reflect conversations over the last few months, highlight the extreme nature of Musk\u2019s planned transformation of Twitter amid the challenge of making the long-struggling company more profitable.<\/p>\n
Twitter has never achieved the profit margins or size of other social sites like Meta and Snap. And Musk\u2019s plan to take the company private \u2013 freeing it from having to please Wall Street \u2013 was a key reason former CEO and co-founder Jack Dorsey got behind Musk\u2019s bid.<\/p>\n
Musk and his representatives did not respond to requests for comment.<\/p>\n
The months-long roller-coaster saga of Musk\u2019s on-again-off-again bid for ownership \u2013 coupled with a tense legal battle \u2013 has left Twitter battered and bruised. It faces significant worker attrition, slowed hiring, stalled projects and a volatile stock price.<\/p>\n
Recently, Andrea Walne, a general partner at Manhattan Venture Partners, a firm that has invested in the deal, told Business Insider that she thinks Twitter is worth only $10 billion to $12 billion and that other partners were trying to get out. <\/p>\n
Musk himself said that he and his investors were \u201cobviously overpaying\u201d for the site during Tesla\u2019s earnings call on Wednesday. Walne did not respond to requests for comment.<\/p>\n
Musk has suggested he\u2019ll loosen content moderation standards and favours restoring former president Donald Trump\u2019s account (on Tuesday he posted a meme of himself, Kanye West and Trump each holding a sword for the social media company he owns or is in the process of purchasing).<\/p>\n
Musk has told investors that he plans to double revenue in three years and would triple the number of daily users that can view ads in the same period, though he\u2019s offered scant details on how he would accomplish those goals.<\/p>\n
Twitter estimates that its monetisable daily active users (MDAU), defined as the number of users eligible to see ads, is 237.8 million, up 16.6% compared with the same quarter last year. But documents that have emerged in Twitter\u2019s court battle with Musk point to far lower numbers, with Musk\u2019s side claiming, using Twitter\u2019s own data, that fewer than 16 million users see the vast majority of ads.<\/p>\n
Moreover, the time those users spend browsing Twitter declined 10% over the course of 2021 and only recovered slightly in the first quarter of 2022, according to the interviews.<\/p>\n
Gutting and then reshaping the workforce through rehiring chosen people is a huge part of Musk\u2019s ambitions, according to interviews and documents. Though Musk has previously indicated he would be open to cutting staff \u2013 legal filings show that he agreed with a friend over text that the company\u2019s head count didn\u2019t justify its revenue when compared with other tech companies \u2013 he has not offered specific numbers publicly.<\/p>\n
In presentations prepared for investors and other interested parties, Musk\u2019s optimistic business projections were fuelled in part by steep job cuts across what was termed a \u201cbloated\u201d organisation. One prospective investor, who spoke on the condition of anonymity to candidly describe Musk\u2019s proposals, likened them to leveraged buyouts, where companies are made profitable through devastating cuts to labour and operations.<\/p>\n
But Musk has told associates he thinks that dramatically slimming down the company is the first step to executing a turnaround strategy that would then involve bringing in more effective workers and profitable innovations. Those include expanding on new services that he has claimed 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 such a model, called Twitter Blue).<\/p>\n
But Twitter\u2019s own data has found that subscriptions may not bring in significant new revenue, according to the interviews. That\u2019s because the users who view the most ads \u2013 roughly the top 1% of users in the United States \u2013 are also the ones most likely to join a subscription service. If they began paying a monthly subscription and went ad-free, the programme could cannibalise the most lucrative part of Twitter\u2019s current ad business.<\/p>\n
Twitter\u2019s budget for head count \u2013 roughly $1.5 billion last year \u2013 includes many highly paid ad salespeople and several thousand engineers. <\/p>\n
The company also spends hundreds of millions on contracting firms that pay people to review reports of hate speech, child pornography, and other ugly and rule-breaking content on the internet. Some of the planned cuts were put on hold pending the sale to Musk, which was announced in April.<\/p>\n
The company is instituting a performance review system called stack ranking that requires managers to grade employees on a numerical curve so that a set percentage of workers will always be marked as low performers, according to one of the company documents obtained by The Post.<\/p>\n
The move has been protested by staff members, but Twitter says other tech companies have the same practices.<\/p>\n
Human resources staff at Twitter have told employees that they aren\u2019t planning for mass lay-offs, but documents show that extensive plans to push out staff and cut down on infrastructure costs were already in place before Musk offered to buy the company. <\/p>\n
Musk would then have built on those plans by first targeting low performers \u2013 people the company\u2019s human resources system designated as \u201cnot on track\u201d or receiving below a 3 out of 5 rating \u2013 before moving to other phases of downsizing.<\/p>\n
For weeks leading into the acquisition announcement, Musk and his attorney Alex Spiro pitched a who\u2019s who crowd of elite investors in Silicon Valley and Wall Street on a deal that was billed as a chance not only to transform under performing Twitter, but to work with the celebrated Musk. Not all potential investors received the same details from Musk\u2019s team.<\/p>\n
Some of Musk\u2019s biggest partners in the deal, including Oracle co-founder Larry Ellison and Sequoia partner Doug Leone, were also Trump supporters and self-proclaimed believers in the type of free speech ideology Musk promised to bring back to the platform. (Leone is no longer a Trump supporter but is said to take an expansive view of free speech). <\/p>\n
Hedge fund manager Kenneth Griffin, a Trump supporter and the second largest GOP donor in the current midterm cycle, also committed a smaller amount \u2013 under $20 million compared with $1 billion from Ellison \u2013 to the deal, The Post has learned.<\/p>\n
But many potential notable funders passed.<\/p>\n
Private equity giants T. Rowe Price, TPG and Warburg Pincus, who collectively control more than $1.4 trillion, all decided not to invest after being approached by Musk\u2019s representatives, according to people familiar with the process.<\/p>\n
And other prominent Silicon Valley heavyweights said no as well. LinkedIn founder Reid Hoffman helped connect Musk with Microsoft CEO Satya Nadella as part of the money-raising process but decided not to invest himself, according to people familiar with the situation. Hoffman is a major Democratic donor, and Musk, at the time, was already talking about restoring Trump.<\/p>\n
Founders Fund, the Silicon Valley venture firm founded by billionaire Republican donor Peter Thiel, also said no. Thiel first worked with Musk in 2000 when the two merged their companies to form PayPal, and Thiel\u2019s associates have said he is a fan of Musk running Twitter.<\/p>\n
It\u2019s unclear whether these parties didn\u2019t buy into Musk\u2019s lofty projection or didn\u2019t want to be involved politically.<\/p>\n
Some passed after the company\u2019s finances, and Musk\u2019s own predicament began to look less attractive.<\/p>\n
One person who lost interest told The Post that he was alarmed after the market downturn and the cost of the deal began taking a toll on Musk\u2019s finances and the crown jewel of his portfolio, Tesla.<\/p>\n
It hasn\u2019t helped that Musk relentlessly attacked Twitter and its leadership after announcing his takeover, pushing down its stock price. Musk\u2019s latest turnabout only added to the sense of chaos.<\/p>\n
\u201c(It\u2019s) like you bought a new car, you decided you didn\u2019t want it, and then you crash it,\u201d the person said. \u201cAnd then you\u2019re like \u2018I\u2019ll keep it.’\u201d<\/p>\n