If you’re unfamiliar with Ben Thompson, his work is everything I strive to emulate in this newsletter. He covers the complex tech business succinctly, offers deep insights from a wide network of contacts, and provides possible solutions plaguing only the most interesting industries. Recently, Thompson and I have been in total agreement about Elon Musk’s potential acquisition of Twitter, the kind of innovation his ownership might bring, and the foolishness of the board to try and diminish it while the company struggles to make a consistent profit.
Thompson’s reasonings are that Twitter was more innovative when it was primary an API and web service:
“Twitter the company ran the service and the Twitter.com website, while third-parties built clients that let you access Twitter first on the desktop and then on smartphones.
Mobile was an absolute boon for Twitter: the public messaging service, modeled on SMS, was a natural fit for a smartphone screen, and the immediacy of Twitter updates was perfectly suited to a device that was always connected to the Internet. The explosion in mobile usage, though, led to a situation where Twitter didn’t actually control the user experience for a huge portion of its users. This actually led to a ton of innovation: Twitterrific, for example, the earliest third party client, came up with the Twitter bird, the term “tweet” for a Twitter message, and early paradigms around replies and conversations. It also led to problems, the solutions to which fundamentally changed Twitter’s potential as a business.”
Twitter inevitably moved into the mobile space itself by acquiring one of these clients, rebranding it as the default Twitter app, and limiting how many users third-party client could register to 100,000 over the application’s lifetime.
Thompson’s hope is that a Musk acquisition would mean a return to this paradigm:
This is all build-up to my proposal for what Musk — or any other bidder for Twitter, for that matter — ought to do with a newly private Twitter.
First, Twitter’s current fully integrated model is a financial failure.
Second, Twitter’s social graph is extremely valuable.
Third, Twitter’s cultural impact is very large, and very controversial.
Given this, Musk (who I will use as a stand-in for any future CEO of Twitter) should start by splitting Twitter into two companies.
One company would be the core Twitter service, including the social graph.
The other company would be all of the Twitter apps and the advertising business.
TwitterAppCo would contract with TwitterServiceCo to continue to receive access to the Twitter service and social graph; currently Twitter earns around $13/user/year in advertising, so you could imagine a price of say $7.50/user/year, or perhaps $0.75/user/month. TwitterAppCo would be free to pursue the same business model and moderation policies that Twitter is pursuing today (I can imagine Musk sticking with TwitterServiceCo, and the employees upset about said control being a part of TwitterAppCo).
However, that relationship would not be exclusive: TwitterServiceCo would open up its API to any other company that might be interested in building their own client experience; each company would:
Pay for the right to get access to the Twitter service and social graph.
Monetize in whatever way they see fit (i.e. they could pursue a subscription model).
Implement their own moderation policy.
This last point would cut a whole host of Gordian Knots:
Market competition would settle the question about whether or not stringent moderation is an important factor in success; some client experiences would be heavily moderated, and some wouldn’t be moderated at all.
The fact that everyone gets access to the same Twitter service and social graph solves the cold start problem for alternative networks; the reason why Twitter alternatives always fail is because Twitter’s network effect is so important.
TwitterServiceCo could wash its hands of difficult moderation decisions or tricky cultural issues; the U.S. might have a whole host of Twitter client options, while Europe might be more stringent, and India more stringent still. Heck, this model could even accommodate a highly-censored China client (although this is highly unlikely).
I strongly suspect that a dramatic increase in competition amongst Twitter client services would benefit TwitterServiceCo, growing its market in a way that hasn’t happened in years. What is most exciting, though, is the potential development of new kinds of services that don’t look like Twitter at all.
Thompson goes on further, describing a truly open TwitterServiceCo having the potential to be a new protocol for the internet:
A truly open TwitterServiceCo has the potential to be a new protocol for the Internet — the notifications and identity protocol; unlike every other protocol, though, this one would be owned by a private company. That would be insanely valuable, but it is a value that will never be realized as long as Twitter is a public company led by a weak CEO and ineffective board driving an integrated business predicated on a business model that doesn’t work.
This is the part where I break off from Thompson. The advent of a super-sized API service that serves short bursts of text, video, and other media isn’t special. There’s already an existing open source decentralized social network protocol implemented on massive scale called ActivityPub. Activity pub duplicates the functionality of Twitter in an open manner, allowing anyone to host an instance of a Twitter-like service with their own moderation policy while allowing users that have signed up on one site communicate with any other (if allowed by that site’s administrator) in the network.
Of course, Thompson is arguing the TwitterServiceCo’s business case. But the growth of any protocol is dependent on the ease and portability developers find it to work with. Having burnt so many bridges in the past the implementation of an open competitor to ActivityPub will have to be exceptional to convince a sizable number of developers to invest their time and money.
I’m not sure what Twitter should do. The service it provides is replicable, it’s relationship with developers is trepidations, and all eyes are on its users for perceived abuse and slight. Those users provide the real value to Twitter. A social platform of the most influential minds ripe for influencing. If someone were able to make those minds move, what does Twitter have left?
January last year, Twitter bought newsletter platform Revue, a Dutch startup that allows users to publish and monetize email newsletter similarly to Substack. Publicly in a blog post, Product Lead Kayvon Beykpour and VP of Publisher Products Mike Park suggested that this was an additional way Twitter could serve writers and publishes that had built an audience on its platform. Coincidentally, this acquisition occurred right at the peak “is this the future of media” panic wave driven by Substack. Twitter has a history of buying early competitors in “new” media. Their acquisitions of Periscope and Vine are historical successes. Spaces was a clone of Clubhouse in its prime. These acquisitions are indicative of Twitter’s consumer base. It must stay relevant and fresh to keep its only unique asset. Influential high-society persons with media addictions.
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