On Thursday, October 20, some media quoted people familiar with the matter as saying that Twitter is expected to carry out large-scale layoffs in the next few months. Musk told potential investors in the Twitter deal that he plans to cut nearly 75% of Twitter’s 7,500 employees, people familiar with the matter said. During Tesla’s third-quarter earnings call on Wednesday, Musk said he was paying too much for Twitter:
While it’s clear that myself and other investors are clearly overpaying for Twitter right now, Twitter’s long-term potential is, in my view, an order of magnitude higher than its current value.
According to media reports, Twitter management plans to cut its payroll expenses by $800 million by the end of 2023, which means a 25% reduction in the number of employees.
In a June Q&A with Twitter employees, Musk said the need to “rationalize headcount,” saying:
Any employee who makes a significant contribution to Twitter should have nothing to worry about.
However, Musk’s comments at the time came before he attempted to pull out of the deal in early July, before Twitter sued him, seeking to enforce the terms of the merger agreement. Musk apparently changed course after realizing he might lose a legal battle with Twitter.
This isn’t the first time Musk has mentioned significant layoffs following the Twitter acquisition.
As early as May of this year, there were media reports that Musk planned to lay off about 1,000 people at Twitter at that time. At the time, Musk also announced plans to increase Twitter’s total workforce to more than 11,000 by 2025.
According to Statista, Twitter started with just eight employees in 2008, a year later that number increased to 29, followed by a dramatic increase to 130 in early 2010, before doubling in January 2011 more, reaching 350 people. As of December 2013, Twitter had 2,712 employees, and over the past decade Twitter’s headcount has grown steadily, with a few drops. At the end of 2020, Twitter had 5,500 employees, and at the end of last year, the latest statistics put the company at 7,500 employees.
Despite its steady growth in employees, Twitter’s staff size is much smaller than Facebook’s. In December 2021, Facebook had 71,970 full-time employees, up from 150 in 2006. Amazon has more than 1.6 million employees.
Layoffs are common during corporate mergers and reorganizations. But Musk’s current acquisition of Twitter remains uncertain, which may seem “too blunt.”
Rob Enderle, a tech industry analyst at the Enderle Group, said:
Announcing layoffs before your due diligence is complete is usually a bad form, mainly because the new owners don’t know what they have until it’s done, so there’s no way of knowing if they’re understaffed or overstaffed.
Musk’s frequent signals of layoffs can unnerve Twitter employees, many of whom may choose to change jobs.
Some analysts also said that Musk may not know the inner workings of Twitter, and it is difficult for him to make accurate judgments on such a content social media platform company based on his own experience.
Musk has said he aims to grow Twitter’s annual revenue to $26.4 billion by 2028, up from $5 billion last year. In his plan, advertising revenue, which currently accounts for about 90% of Twitter’s revenue, will drop to about 45%, while paid content will contribute about $10 billion a year.
According to Jim Purtilo, an associate professor of computer science at the University of Maryland:
I don’t know if 7,500 employees is just right for Twitter. However, few companies like to use headcount as a basis for comparison. Compared to other tech companies, Twitter is inherently unique. Many of these employees may handle content moderation, others may sell advertising, more or less, we don’t know.
There may be some redundancies, but what are Twitter’s goals for the future? Can adjusting the number and structure of personnel increase its profitability? These are what the market has to watch. Ultimately, I think, what drives staffing adjustments is earnings expectations.
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