Charging users $8 a month to verify their accounts is unlikely to cover much of the debt service costs resulting from Elon Musk’s $44 billion acquisition of the social media company. This could also drive away most of the influential people the platform requires.

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Witter must pay its bills. The firm’s new owner Elon Musk insisted as much in a tweet Monday in response to author Stephen King’s criticism of a plan to charge Twitter users $20 a month for account verification. Musk changed course quickly on Tuesday when he issued a statement. tweeted compromise: “Power to the people! Blue for $8/month” (though the plan may have changed again by the time you’re reading this).

Musk finally bought the social media giant for $44Billion last Thursday. This was nearly six months since Musk announced the deal had been delayed due to bot concerns. There were many key questions that remained. One of the most important questions was how Musk intends to turn Twitter into a profitable company, particularly with huge bills in sight. For stock that could have been vested, employees are responsible. And there’s also the nearly $1 billion in annual interest expense that analysts estimate the company could be saddled with due to at least $13 billion of debt likely used to finance one of the most expensive acquisitions in tech history.

The $8 per month fee for account verification may be a piece of that puzzle—but it’s likely a small one. SME estimates that 10.4 million users would have to pay that fee each year to service Twitter’s debt—approximately 25 times more than the roughly 400,000 users currently boasting blue check marks free of charge. Adopting this fee could lead to Twitter losing the most powerful users it relies upon for its success.

Even if some of Twitter’s users are ultimately willing to pay $8 a month for account verification, it’s unlikely to make much of a dent in the $1 billion of annual interest expense, according to Wedbush analyst Dan Ives, who covers Twitter. Ives believes the $8 per month fees could generate new revenue equal to 4-5% of the company’s largest existing revenue stream, advertising revenue, “out of the gates depending on uptake if adoption is strong.” At most, that would infer $230 million to $290 million of new revenue based on Wedbush’s most recent forecast for total 2022 revenue at $5.8 billion—or 2.4 million to 3 million users paying $8 per month. Asked whether he could ever see $8 per month account verification generating $1 billion of revenue, Ives said “nope, just helps fill the hole to higher monetization of Twitter, which has been on a treadmill the last decade.”

The $8 monthly charge “is about adding an incremental revenue stream,” according to analyst Richard Greenfield of Lightspeed Partners, …read more

Source:: Social Media Explorer

Author: Aaron