The real problem with Twitter

By Paddy Stephens

After months of indecision, dissimulation, and screeching U-turns on the road to a Delaware courthouse, Musk has finally bought Twitter. Not content with owning Tesla and SpaceX, he decided, allegedly for altruistic reasons, to add ‘Chief Twit’ to his list of accolades. Many worry whether he is up to the task; his puerile sense of humour offers little reassurance.

Seeking to prove the critics wrong since the acquisition, he has been nothing but a paragon of tact and maturity. I’m kidding, of course: he tweeted a video of him walking into Twitter HQ carrying a sink with the caption “let that sink in”, fired the CEO and most of the senior team, and filled my feed with forlorn posts from software engineers who are now, in the Linkedin lingo, exploring opportunities.

Twitter matters. If you follow the right people on Twitter, you often find out news before any media outlet has reported on it. There’s an amusing and terrifying truth behind that: journalists find most of their stories on Twitter. If it’s a slow day for online news, they’ll be having a look through Twitter for anything new to put up. The first outlet to break news used to be whichever got a tip-off; now it is whichever’s journalists are the most obsessive scrollers. The news is full of stories – also sources and videos – found originally on Twitter.

So back to Musk. His assessment was that the business had “too many managers, not enough coders”. That seems to imply that what he’s bought is an overinflated tech business; but it is so much more than that. 

Not to sound too much like a PPE student, but it’s worth distinguishing two different Twitters. The first is a tech company, which had been losing money for two years even before interest rate rises sucked investment away from tech stocks, causing them to plummet. The concept was new and bold in 2006 when it launched but now just feels like a tired tribute act for the character-limited SMS of the 2000s. Its UI is solid, but hardly groundbreaking. The second is the online community which brings together academics, politicians, journalists and others from across the world and which sets the news agenda, in the UK at least.

Let’s start with Tech Company Twitter, whose market value is essentially just advertising revenue. With a userbase dwarfed by Facebook or Instagram, and a reputation for inaccurate ad-targeting, its income from that stream is comparatively low. To improve its market value, it needs to either boost ad revenue by increasing users or get an additional revenue stream, an idea Musk is exploring through charging per tweet or for blue ticks.

To improve its market value, it needs to either boost ad revenue by increasing users or get an additional revenue stream, an idea Musk is exploring through charging per tweet or for blue ticks

To my mind, charging for Twitter and boosting ad revenue are mutually exclusive. To boost ad revenue, Twitter needs to increase its daily active users from a paltry 206 million. But if the problem is that Twitter’s user base is too small to attract ad revenue, where is it going to expand? Its user base in North America has started to decline, albeit at 0.5% annually. Even if that figure could go positive again, it is hard to escape the conclusion that Twitter’s usage there is near a saturation point: almost 80 million Americans use it, and many of the others are too busy on TikTok to become Twitter addicts. Annual growth in Western Europe is clipping along at 3.8%, but the total population there is significantly less than that of the US. Most of the growth in total users is likely to come from developing countries: those with the third, fourth and fifth highest number are India, Brazil, and Indonesia respectively. To charge for Twitter would be to create a barrier to entry and a disincentive to join in most significant in markets Musk should be trying to attract.

I doubt Musk will charge per tweet, but for “blue ticks” is a different matter. And this is where we come back to the Twitter Community. The idea of charging for “blue ticks” tells us something about where Twitter is headed.

Twitter has its fair share of shitposting (including my now ex-Durham friends who find real jobs boring). Unlike any other site I can think of, except perhaps the viscerally intolerable Linkedin, it has genuine experts offering their insight for free. Last week, my feed was full of threads by financial journalists and economists explaining, justifying, and critiquing the Bank of England’s interest rate rise. A few weeks before, it was abuzz with China experts and commentators weighing in on the Party Congress. It’s the kind of insight I could only get by subscribing to the FT or a specialist newsletter.

The real value in Twitter, or any social media site, is in the people that produce its content. On Twitter, unlike Youtube, users do not make any money for having lots of followers or producing popular content. Many, like ‘The Money Saving Expert’, use Twitter to help inform people. Charging people to post on Twitter is, in some cases, charging experts to provide free content which is half the reason people continue to use the platform. As Stanford Political Scientist Michael McFaul put it to his 870k followers, “shouldn’t he (or my readers) be paying me?”. A similar argument applies against charging them to hold the blue tick badge.

Blue ticks – the people, not the badge – produce most of the content worth reading on Twitter. If Musk were to charge for the badge, many who currently have one would have little financial trouble affording one. But many object to the idea of paying: partly to the idea of giving Musk money, and partly to the idea that the acolyte can be bought not earned.

Twitter’s attempt to retain its influential user base by highlighting people on the platform you can trust

The blue tick, along with a feature asking you whether you want to actually read an article before you share it to the world, is Twitter’s attempt to retain its influential user base by highlighting people on the platform you can trust. The danger Musk faces in alienating blue ticks is neatly summarised in the phrase “network effects”. Well-known is its positive version in which the more people are in a network, the more value there is in joining, and the more people will join, driving the dizzying exponential growth of social media companies. But the logic could work the other way too: blue ticks love, above all else, locking horns with other blue ticks on Twitter. What begins as a slow trickle leaving becomes a cliff edge when enough of them leave, and those remaining have less and less reason to keep coming back.

So let’s say, as seems likely, that some blue ticks would stop using the platform if they had to pay for it. Probably, that number is small enough to avoid the tipping point just described. But that is not guaranteed. And that slow trickle is already taking advertising revenue in the wrong direction.

A lot of influential people value Twitter. For all its flaws, there is a lot of good will towards it. One of the issues with Musk buying Twitter is he has destroyed any good faith. Alongside its advertising, it is not inconceivable that many of its richer users would have donated to Twitter to help cover the shortfall. That would be one way to overcome the fact that its market valuation does not reflect its real value. With a billionaire man-child in charge, that is no longer conceivable. He will have to resort to market solutions to make the company more valuable. The question is whether he can do it without destroying Twitter’s far greater value as a community.

So here we come back to the ultimate problem: the market value of social media companies grossly undervalues them as communities. The only solution economics has, that I know of, is nationalisation, which for an international company is inconceivable. So that, I suppose, is how it will stay. Tech Company Twitter’s profitability may or may not improve in coming years; but I think it will almost certainly come at the expense of the far more valuable Twitter Community.

In the early, utopian days of the Internet, many dreamt of it as a place for open discussion for people from across the world. Twitter, for all the shitposts, pile-ons, and trolling, is the closest to that we still have. So let’s hope Musk knows what he’s doing.

Photograph: Stock Catalog via Flickr

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