If We Ruled the Tweets

Twitter's Power Users, the WeChat Opportunity, and TweeterDAO

May 9

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Hi friends 👋 ,

Happy Monday! And a very happy belated Mother’s Day to all the mothers out there, especially to Puja and both of our moms!

Speaking of mothers, today, we need to talk about the mama’s boy who brought his mom to the Met Gala… Elon Musk.

When the Twitter acquisition was a story about free speech and content moderation, I didn’t have much to say. Those are really hard problems about which I have no special insights to contribute. But over the past week, the story has evolved into one with which I’m much more comfortable: how to better monetize Twitter.

I have some ideas, one of which is that Twitter’s users should have a seat at the table, and upside in the outcome.

Let’s get to it.

If We Ruled the Tweets

Ok, hear me out… TweeterDAO.

On Thursday, a new amended 13D filing showed that Elon Musk rallied the troops to pony up $7.1 billion of his $44 billion Twitter bid.

This is interesting for a few reasons.

First and foremost, it means that Elon’s assertion that he “doesn’t care about the economics at all” no longer holds. He needs to care about economics now. Twitter will need to generate enough money to pay Elon’s debt service, and to generate a return for its investors, including VC firms a16z and Sequoia. VC firms don’t typically play for 2x returns; while Elon and Twitter make this a special case, their involvement signals that economics do matter.

Second, it cuts Elon’s margin loan from $12.5 billion to $6.25 billion, lowers the debt burden, and gives him some more room to experiment from a cash flow perspective. He can get a little more aggressive in this scenario.

Third, Elon is rumored to be telling investors that he’s stepping in as interim CEO. He’s not known for doing things in a small way.

Finally, crypto exchange Binance is a fascinating inclusion, particularly after its founder CZ tweeted, “Privatize it, issue a token, decentralize it” last month. While I think it’s unlikely that Elon decentralizes Twitter in the near-term, Binance’s involvement means more decentralized solutions may be on the table.

Speaking of which… Elon should give a DAO made up of Twitter’s power users a place on Twitter’s cap table and a seat on its board. Call it TweeterDAO.

Giving TweeterDAO a board seat is a step short of issuing a token and fully decentralizing. It’s a step short of the direct democracy he thinks humans should use to govern Mars. But it’s a big step in the right direction from a board made up of people with practically no ownership and famously little usage of the product.

Chris Bakke @ChrisJBakke

Elon Musk is in for a bad time. I’m not sure he’s prepared to take on a couple PhDs, a few MBAs, and a Baroness who use Twitter once a year (to reset their passwords) and collectively own 77 shares of the company.

In a TED interview last month, Elon told Chris Anderson that he wanted as many Twitter shareholders as possible to retain ownership, so that they could share in the governance of the platform, and that he thought the SEC limited it to 2,000 people. This DAO structure might be a workaround.

Not surprisingly, I think that investing in the equity – directly or via DAO – of the new private Twitter is a compelling bet. It was one of my top picks at the Acquired Arena Show the night before the investment was announced.

Packy McCormick @packyM

My 3 picks at the @AcquiredFM Arena Show last night: 1. The @ComposerTrade Rising Rates with Vol Switch Symphony bc I'm a terrible trader 2. Equity piece of Twitter Take Private -- didn't realize so many investors were watching! 3. $OPEN because bps for breakfast

I had no inside knowledge, just a longstanding belief that Twitter can and should be so much more than it is. Prognosticating on, and being overoptimistic about, Twitter’s future is a treasured pastime here at Not Boring. In July 2020, I wrote If I Ruled the Tweets. In February 2021, I followed up with How Twitter Got Its Groove Back. Hell, in March 2021, Marc Rubinstein and I even kinda defended Jack in Jack of Two Trades.

In If I Ruled the Tweets, I wrote, “Twitter is the most undermonetized product in the world, because it doesn’t know what it is.” While its ad business has grown and improved slightly since then, and it finally introduced some light subscriptions, the point stands. The delta between Twitter’s importance and its business performance is gaping.

But the company has seemingly infinite shots on goal to try to turn the business around because its power users are incredibly sticky (read: addicted to Twitter) and the magical experiences are unbelievably magical. It’s the home base for The Great Online Game.

Elon, my inspiration for that essay and a power user himself, has some thoughts on how to turn things around. Over the weekend, The New York Times shared information from a leaked pitch deck Elon is using to raise money for the deal. According to The Times, plans include:

Quintuple revenue to $26.4 billion by 2028.
Cut Twitter’s reliance on advertising to less than 50 percent of revenue.
Produce $15 million in revenue from a payments business, and $1.3 billion by 2028.
Increase average revenue per user by $5.39, to $30.22.
Reach 931 million users by 2028.
Have 104 million subscribers for a mysterious “X” by 2028.
Hire 3,600 employees — after shedding hundreds.

And of course, he expects there to be 69 million Twitter Blue subscription users by 2025. Nice.

While the projections are characteristically aggressive, and the underlying products (“X”) that would get Twitter there are vague, I don’t doubt that Elon will be able to multiply Twitter’s business. You don’t even need to be an Elon fanboy to believe that; you just need to agree that Twitter has been leaking value that a strong management team should be able to capture.

While Elon talks a lot about free speech, and I think he genuinely believes it’s a key reason for doing this, when he buys Twitter, Elon will also be buying one of the rarest assets on the planet: one of the few at-scale social graphs (in this case, the interest graph) where more of the world’s decision-makers shape ideas, and have their own ideas shaped.

That presents both an incredible financial opportunity, and a largely unprecedented governance challenge. Twitter’s users should be able to participate in both.

So today, we’ll cover three things:

What does Twitter think it is, and what is Twitter?
What New Twitter should build
TweeterDAO

What does Twitter think it is, and what is Twitter?

Twitter’s problems stem from confusion about what it is, and the advertising-based business model choices it’s made as a result.

In If I Ruled the Tweets, I wrote that Twitter’s main challenge was its confusion over its identity:

Twitter thinks it’s Facebook, but it’s LinkedIn.
Twitter thinks it’s an ad product, but it’s a subscription product. It thinks it’s an Aggregator, but it’s a Platform. It thinks it’s a social network, but it’s a professional network: one built for the Passion Economy, based on the strength of ideas instead of past experience.

Look, it was early 2020 and I was a newly-full-time *creator* and the Passion Economy was hot, so maybe I focused a little too narrowly, but two years later, the main point stands. Twitter isn’t a social network as much as it is a professional network.

In How Twitter Got Its Groove Back, I summarized why understanding what it is, who it’s for, and which business model was so important for Twitter:

If on ad-supported social networks, like Facebook, advertisers are the customer and users are the product, on LinkedIn, most users are the product, but power users are the customer. Only 18% of LinkedIn’s revenue pre-Microsoft acquisition came from ads; the rest came from selling tools to power users, both companies and individuals.
For Twitter, its power users, and the people who should be its customers, are the 10% of users who generate 80% of the tweets. We’ll call them Creators. The Creators’ Job-To-Be-Done is to get their ideas, products, newsletters, courses, videos, podcasts, investment ideas, and the other things they’re selling in front of people.

Again, Creator sounds too narrow and too 2020, but I’m referring to the users who create content on Twitter – individuals and businesses alike. And again, I think the argument stands.

Instead of an Aggregator that operates like a social network and monetizes through ads, Twitter should be a Platform that operates like a professional network and monetizes through subscriptions.

With a couple more years of evidence and wisdom, though, I think I undershot it. Because for as strong and focused as LinkedIn’s business is, it’s more focused and narrow than Twitter needs to be. Twitter is addictive, engaging, and valuable to its users in a way that LinkedIn isn’t.

Addictive. Twitter behaves like a professional network sometimes, but it’s also where many of the world’s most powerful people go when they’re feeling curious, feisty, inspired, or just bored. I don’t know anyone who checks LinkedIn as compulsively as Twitter.

Engaging. And when they check, they engage. This image that Ben Thompson included in his recent Back to the Future of Twitter captures the difference between how users interact with Twitter and Instagram well.

Valuable. There’s a question that goes around Twitter every so often that goes something like “How much would someone have to pay you to not use Twitter?” I asked it myself while I was writing this piece, and the answer is eye-popping but not surprising. Across over 1,100 responses to my very unscientific poll, 40% of respondents said they’d need to be paid more than $10,000 per year to not use Twitter.

Packy McCormick @packyM

How much would someone have to pay you per year to not use Twitter?

Again, not scientific, but I think it’s directionally accurate for a subset of Twitter’s most valuable users – the “Creators” who send 80% of all tweets – and specifically the subset of that group whose business or income benefits from Twitter. For that 40%, Twitter is leaving so much money on the table that you can’t even see its current ARPU on the graph unless I make it really tall.

I don’t think Twitter should start charging power users $10,000 per year (Elon: please don’t start charging power users $10,000 per year), but there’s somewhere between the $0 it currently charges and the $10,000+ people would be willing to pay that Twitter can charge its users for a better user experience and access to better products from Twitter (or built on Twitter).

Twitter doesn’t need to build the biggest network in the world to be wildly successful. It just needs to make sure it serves its smaller segment of higher-value users better, and monetizes them much better, than it does today.

That view informs what I think New Twitter should build.

To learn what I think Twitter should build and how a TweeterDAO might work…

Continue Reading Online

Thanks to Dan for editing!

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Thanks for reading, and see you next Monday,

Packy

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