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Twitter India’s employee cost doubled in FY22 before Musk’s downsizing

Twitter India’s employee cost doubled in FY22 before Musk’s downsizing
Photo Credit: 123RF.com
11 Nov, 2022
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New Delhi: Twitter Communications India Private Limited, the India division of the Elon Musk-owned social media platform, registered its first net loss in the country in a span of nine financial years on the back of higher employee benefit expenses in FY22. Company data accessed through the Ministry of Corporate Affairs (MCA) database by Mint showed that while Twitter India’s net sales grew 81.5% over FY21, a 2.2x uptick in employee benefit expenses led to the company clocking net loss during the previous financial year.

According to Twitter India’s regulatory filings in the country, net sales in FY22 reached ₹156.75 crore, up from ₹86.36 crore in FY21. However, employee expenses rose to ₹136.81 crore in FY22 from ₹43.26 crore in FY21. As a result, the company registered a net loss of ₹31.84 crore in FY22, in comparison to ₹7.76 crore net profit in FY21. As of FY22, employee cost accounted for 78% of the company’s expenses in India — up from 59% the year before.

It is this expense that Musk seemingly cut down on, when the company fired nearly all of its 230-250 member India staff on Friday, November 4. Mint reported that the company had around 10 employees left in the country after the layoffs.

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Musk had said in a tweet earlier that Twitter was losing over $4 million per day, which made the employee restructuring necessary. “Everyone exited was offered 3 months of severance, which is 50% more than legally required,” he added.

Industry experts believe that while Twitter India’s net sales rise was in line with a jump in ad revenue linked to increased online advertising amid the covid-19 pandemic, the rise in employee expenses may have been a voluntary decision taken by the company to set-up bigger operations in the country — before the Musk takeover altered its erstwhile plans.

“The rise in net sales for Twitter could have only been linked to a rise in ad sales. While Facebook and Google offer information technology (IT) and data services in the country, Twitter does not sell any products in India apart from its digital advertisement stream. The spike in its earnings for FY22 is not unexpected, given that the aftermath of the pandemic saw growth in digital ads for most tech firms,” said Akshara Bassi, research analyst for global cloud and servers market at Counterpoint India.

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However, Bassi added that the spike in employee expenses may have been a product of the rise in sales, as well as an effort to add more revenue streams to its domestic operations.

Tech companies, including Meta and Google, had hired many new employees during the pandemic, expecting the impact of digitization to continue post pandemic. However, even Meta CEO, Mark Zuckerberg, admitted in a blog post on Wednesday that the impact had reversed as things returned to normal. Meta announced plans to layoff 11,000 employees on Wednesday.

“Twitter India added an engineering team in the country in FY22, which shows you that the company was looking to expand operations. As a result, its net loss may not have been a big factor for the long run, since its increased hiring and salaries may have been normalized over the next three to five years,” said Bassi.

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Prasanto K. Roy, a tech policy analyst, added that the pandemic-induced rise in ad sales is what led to “significant expansion in a couple of India teams — especially engineering and business operations — on account of an incorrectly projected future growth.”