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That brings it down to under 1000 employees So Elon paid $44B for a company now with 900-odd employees. For a 10-year ROI, that's $4.4B per year profit, or $44
by toss1 4y ago
That brings it down to under 1000 employees
So Elon paid $44B for a company now with 900-odd employees. For a 10-year ROI, that's $4.4B per year profit, or $440 million/per employee
For contrast, Netflix has the highest revenue per employee at $2.63 million/person, and Apple is second at $2.38 million, and Alphabet & Meta next at $1.64, and eBay at $0.9 million per employee.
So, he'll need to get 200x the profitability per employee, just to get a total profit equal to his investment in 10 years.
To get a company valuation back to his purchase price, at a 20X multiple, he needs to make those employees as profitable per employee as Apple. In a business that has never been consistently profitable, has not much of a moat, and in which he'd panicked almost all of his advertisers, the primary customers.
Good luck with that
- randomsearch 4y agoIf he needs more than 900 employees, he can just hire more. He is not fixed at "900 employees", so the premise of this argument is invalid.
- noelsusman 4y agoThere's a reason he tried to get out of this deal. He's going to lose billions of dollars on this, the only question at this point is how many billions.
- Zigurd 4y agoThis is an under-explored part of how we got here. Elon did not want to buy Twitter. He bought it only because he thought he could flip it and lose less than what settling would cost (plus what damage depositions would do). Right up to a few days before the deal closed, Elon was hoping he would not have to actually run Twitter. And that's the second part that is under-explored: Elon could not find a CEO. And he never will until he admits all of his and the coinvestors' equity stakes are now worth zero, and he takes a down round that reshapes the cap table and enables a sane incentive package for a CEO.
- detaro 4y agoNeither wanting to flip it nor not wanting to run it explain what he has done once he actually owned though, more the opposite in fact. You don't prepare a company for flipping it by whatever this mess is, nor does it make being its CEO a more attractive job, nor did he have to run in as directly as he does. (Well, unless you don't care about the flipping price. Verizon managed to sell Tumblr after all ;))
- Casteil 4y agoPerhaps he thought it'd be easier than it really is after SpaceX's wild success in reusing orbital rocket boosters.
- hairofadog 4y agoThe ones who stay are going to work nights and weekends, though.
- fasthands9 4y agoIt seems like ad spending is only going to get more difficult since there are way more options, spending is down in general, and Twitter is not video centric. That being said if you think those things are true then the absolute right move is to scale back operations and stop trying to be a growth innovator - and instead just be a really great forum. Reddit has 700 employees. Twitter can probably survive with 1000. It probably wont work out but maybe if revenue grows 10% per year and they can get paid features up to 1 or 2B per year it works out.
- toss1 4y agoYup, and to do that, he'll have to go right back to the mainstream moderation he loathes, as advertisers won't pay for even uncertainty (nevermind a hellscape), and the right-wing market won't pay and already has several sunken or underwater competitors.
- everforward 4y agoI can't find an exact breakdown, but the sources I can find say that ads are still a majority of Reddit's revenue. Reddit also has some structural advantages. Building around communities allows Reddit to ban advertiser unfriendly communities, and to threaten to ban others to force them to toe the line. It also gives them rough controls over what other users see (e.g. hiding NSFW content, quarantining subreddits so they don't show up on the not-logged-in front page). They've also managed to convince their users to moderate each other for free, which gives them a really lean head count. I think Twitter would need to substantially redefine their product to compete in that arena. Reddit also only made ~$350M in revenue last year. I don't think competing with Reddit is likely to justify the purchase price of Twitter over the timespan either is likely to survive.
- sigil 4y ago> So Elon paid $44B for a company now with 900-odd employees. For a 10-year ROI, that's $4.4B per year profit, or $440 million/per employee. Your math is off. $4.4B per year profit / 1000 employees = $4.4M per year profit per employee.
- whateveracct 4y agoSo still higher than some of the highest benchmarks. 2x instead of 20x. Still tough.
- sigil 4y agoYeah, still tough. More like 5X - 10X. Definitely not the 200X disparity claimed by parent though. Apple had $1M profit per employee in 2021. What’s an achievable PPE for a business like New Twitter? If you say $500K, and if you subscribe to The Headcount Method of Valuation, that implies Musk will need to 10X headcount from this low point to break even in 10 years. (I question the premise though — I don’t think the plan is “extract $44B in cash by 2032.”)
- rsynnott 4y agoWorse than that; the Netflix figure is for _revenue_, not profit.
- dragontamer 4y agoDon't forget the $1.3 Billion in interest payments from the loans they took on. ($13 Billion in debt signed on the deal, assuming 10% rate of CCC bonds from April 2022).
- lamontcg 4y agoI can't wait to see the GDPR lawsuits from the EU.
- joeevans1000 4y agoWhat I've wondered through all this is whether he intends to bring in different contractors than than were there before to replace everyone he is firing or causing to quit. Contractors are more disposable and often cheaper.