I think your numbers are generous. I don't know that Twitter can cut that much expense and remain in a stable state.

Take a look at Twitter's Income Statement from 2021: https://finance.yahoo.com/quote/TWTR/financials/

I think the income statement shows that it would be difficult for Twitter to find $2-3 billion of expenses to cut and still remain a competitive, functional company. You're talking about cutting total expenses by over 50%, including expenses that are not salary.

2021 total expenses of $4.8 billion on a revenue of $5 billion. $1.8 billion cost of revenue, $3 billion operating expense. Out of the operating expense, $1.175 billion is in Selling & Marketing Expense. $1.25 billion in R&D.

Let's say Twitter cuts R&D to $0, that's a $1.25 billion savings. How long can a social media company remain competitive putting $0 into R&D? Are there any examples of any software-adjacent company surviving that spends $0 on R&D?

If they cut SG&A, that will impact revenue negatively. Activities like marketing and sales have an ROI. You spend money to make money. Twitter was spending $600 million a year on SG&A in 2014 when they had less than half their current level of daily active users (DAUs). Twitter has a product, its daily active users. If they can't sell that product to its customer (advertisers) because it doesn't have enough sales staff to physically make the required phone calls (yes, they do that sort of thing with large advertisers), they risk entering the death spiral.

Cost of Revenue: I don't think this line item can be cut beyond a certain level. This is the direct cost of delivering the product. Anything that isn't employee salary can't be cut very easily. Twitter can't turn off servers and sell off data centers without impacting the product.

Twitter had more than 7,500 employees in 2021.

If they cut 80% of staff, that's 5,000 employees gone (and don't forget that those cut employees will still count as 1/4 of an employee for the next year due to the severance payment).

If each employee represents $300,000 in total expense (a very generous estimate), that's only $1.5 billion in savings, and for the first year the savings is only $825 million due to the severance payments.

Okay, maybe Twitter can raise revenue with Twitter Blue. They'll need to pick up a smidge over 15 million paid Verified users in order to cover the $1 billion interest expense. Twitter currently has 400,000 Verified users, ~240 million DAUs, so they need 6.25% of their global user base to purchase a subscription at $8/month. Out of Twitter's DAUs, you'll need to omit most users from countries that won't generally pay $8/month, like India, Brazil, and Indonesia. [3]

For reference, Spotify costs $1.46/month in India.

We could make a rough guess at this by assuming that the 155 million people in the US, Japan, and UK will pay $8/month for Twitter Blue, so you'd need close to 10% of the affluent user base paying for Twitter Blue.

For a benchmark, Discord makes almost all of its revenue from Nitro subscribers. In 2020 it had 14 million DAUs, with $130 million in annual revenue, which means with the $99/annual fee Discord had 1.3 million paid subscribers. In other words, about 10% of Discord users are paid subscribers. [1]

If Twitter can get the same subscriber rate with Blue, it'll reach $1 billion they need to pay off their loan interest, assuming Twitter Blue incurs no additional cost.

The problem is, it can't do that without that pesky R&D that we were talking about earlier. Discord is built around the concept that Nitro offers tangible benefits to paid membership. What features can Twitter build with a skeleton crew that will convince 10% of their users to pay for the service? Twitter Blue currently represents very basic functionality. [4]

I haven't even talked about the fact that I'm just talking interest payments for the debt, and the fact that Twitter wasn't profitable to begin with!

[1] https://www.businessofapps.com/data/discord-statistics/

[2] https://www.businessofapps.com/data/twitter-statistics/

[3] https://www.statista.com/statistics/242606/number-of-active-...

[4] https://help.twitter.com/en/using-twitter/twitter-blue-featu...