Elon Musk warns Twitter could face bankruptcy as top executives flee
Elon Musk told Twitter staff Thursday to brace for "difficult times ahead" and warned that the company could go bankrupt if it doesn't find new ways of making money.
Speaking at an all-employee meeting on Thursday, Musk said Twitter was losing money and that "bankruptcy isn't out of the question," according to reporting from Platformer and Bloomberg.
The revelations marked another whirlwind day since Musk took control of the social media platform.
Late Wednesday night, Musk sent his first email to employees, ordering them to stop working from home and to show up at the office Thursday morning, reversing the work-from-anywhere policy Twitter implemented during the pandemic.
"Sorry that this is my first email to the whole company, but there is no way to sugarcoat the message," wrote Musk, before he described a dire economic climate for businesses like Twitter that rely almost entirely on advertising.
"Without significant subscription revenue, there is a good chance Twitter will not survive the upcoming economic downturn," Musk said. "We need roughly half of our revenue to be subscription."
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The following day, Musk called his first "all-hands" meeting, where he gave a bleak assessment of the company's finances and expanded on the in-person work requirement.
Musk said that while "exceptional" workers would be allowed to work remotely, others who didn't like it could quit, said an employee at the meeting who spoke on condition of anonymity out of a concern for job security. Musk himself is known for putting in arduous workweeks, and has claimed to have worked 120-hour weeks, including all 24 hours of his 47th birthday.
"He has never been a fan of remote work from the start," MarketWatch reporter Andrew Keshner told CBS News.
Layoffs, then resignations
Half a dozen high-profile leaders left Twitter this week, following the carnage of about 3,700 layoffs last week, or half of Twitter's head count.
Departures include Twitter's chief privacy officer, Damien Kieran; its chief compliance officer, Marianne Fogarty; and its chief information security officer, Lea Kissner, who tweeted Thursday that "I've made the hard decision to leave Twitter."
The latest resignations also include that of Yoel Roth, Twitter's head of trust and safety, a previously little-known executive who became the public face of the company's content moderation after Musk took over. An executive confirmed Roth's resignation to coworkers on an internal message board seen by The Associated Press.
Roth's resignation is a "huge loss" for Twitter's reliability and integrity, said his former coworker and friend Emily Horne.
"He's worked incredibly hard under very challenging circumstances, including being personally targeted by some of the most vicious trolls who were active on the platform," said Horne, who oversaw global policy communications at Twitter until 2018. "He stayed through all of that because he believed so deeply in the work his team was doing to promote a public conversation and improve the health of that conversation."
Since the layoffs, Twitter has asked some of the fired staff to return. In the meantime, experts say the dramatically smaller headcount will likely make it harder for the platform to uphold its legal obligations to ensure users' data privacy.
Cybersecurity expert Alex Stamos, a former Facebook security chief, tweeted Thursday that there is a "serious risk of a breach with drastically reduced staff" that could also put Twitter at odds with a 2011 order from the Federal Trade Commission that required it to address serious data security lapses.
"Twitter made huge strides towards a more rational internal security model and backsliding will put them in trouble with the FTC" and other regulators in the U.S. and Europe, Stamos said.
FTC is watching
The FTC said in a statement Thursday that it is "tracking recent developments at Twitter with deep concern."
"No CEO or company is above the law, and companies must follow our consent decrees," said the agency's statement. "Our revised consent order gives us new tools to ensure compliance, and we are prepared to use them."
The FTC would not say whether it was investigating Twitter for potential violations. If it were, it is empowered to demand documents and depose employees.
In an email to employees seen by the AP, Musk said "Twitter will do whatever it takes to adhere to both the letter and spirit of the FTC consent decree."
"Anything you read to the contrary is absolutely false. The same goes for any other government regulatory matters where Twitter operates," Musk wrote.
Twitter paid a $150 million fine in May for violating the 2011 consent order. Its updated version established new procedures requiring the company to implement an enhanced privacy protection program as well as beef up info security. The new procedures also require the company to include an exhaustive list of disclosures Twitter must make to the FTC when introducing new products and services — particularly when they affect personal data collected on users.
"If Twitter so much as sneezes, it has to do a privacy review beforehand," tweeted Riana Pfefferkorn, a Stanford University researcher who said she previously provided Twitter outside legal counse
Musk is fundamentally overhauling the platform's offerings and it's not known if he is telling the FTC about it. Twitter, which gutted its communications department, didn't respond to a request for comment from the AP Thursday.
The mercurial CEO, who has been fined over cavalier tweets in the past, has a history of tangling with regulators. "I do not respect the SEC," Musk declared in a 2018 tweet, referring to the Securities and Exchange Commission.
The consequences for not meeting FTC's requirements can be severe — such as when Facebook had to pay $5 billion for privacy violations.
Appeal to fleeing advertisers
Musk's memo and staff meeting echoed a live-streamed conversation on Twitter Spaces Wednesday in which Musk tried to assuage advertisers, who have been fleeing Twitter, citing a rise in hate speech on the platform, since he took control of it late last month and dismissed its top executives.
Advertisers including Oreo maker Mondelez, Allianz, Audi, General Mills, GM, United Airlines and Pfizer have paused their ads on the platform, leading to a major cash crunch for the company. More are expected to follow.
In his live-stream, Musk asserted that hate speech has declined on the platform since he took over and asked advertisers to be patient, warning them that the company would do "plenty of dumb things" in coming weeks.
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"If we do not do bold moves, how will we make great improvements? We have to be adventuresome here and then I think we will make really big leaps," he said.
For now, Twitter relies exclusively on advertising for revenue. Musks' goal is to reduce that amount to half, while bringing more money in from subscriptions. In the Thursday email, Musk told employees the "priority over the past 10 days" was to develop and launch Twitter's $8 monthly subscription service, which includes a blue check mark next to the name of paid members — the mark had previously only been given to verified accounts.
The project has had a rocky rollout, as newly bought fake accounts this week have tried to impersonate high-profile figures such as basketball star LeBron James and the drug company Eli Lilly.
In a second email to employees, Musk said the "absolute top priority" over the coming days is to suspend "bots/trolls/spam" exploiting the verified accounts system.
On Friday, the rollout of the new subscription service, Twitter Blue, a flood of fake accounts had been frozen by the company, according to tech reporter Zoe Schiffer.