The political philosopher Hannah Arendt, analyzing the fall of democratic Germany to the Nazis, observed that totalitarianism comes to power through a “temporary alliance between the elite and the mob.” Seventy years ahead of her time, she couldn’t have articulated a more apt description of Twitter, Inc. The company has become a primary platform for just such an alliance: totalitarianism, but with stock options.
The stock isn’t even worth that much, relatively speaking. On the day of Twitter’s initial public offering, in 2013, shares closed at $44.90. On January 28, they closed at $51.57. That’s an increase of about 1.9 percent per year — barely more than the rate of inflation. Facebook has nearly sextupled over that period. Even the New York Times Company, once thought doomed by the rise of social media, has almost quadrupled. As a business proposition, Twitter’s decade-long experiment in monetizing rage and disinformation has failed.
A little over a year ago, I joined a chorus admonishing the company. “Algorithms that promote conspiracies and junk science, and inconsistent application of your terms of service, have resulted in a firm that not only underperforms, but is dangerous,” I wrote in a public letter to the board. “The poor citizenship of Twitter is bad. What’s worse is Twitter’s malfeasance coupled with scant benefit to stakeholders.” Despite the fact I owned $10 million of the stock, the company didn’t even respond, let alone act on the advice. So let me put it a little more plainly.
Trafficking in misinformation is wrong. Trafficking in misinformation with a structurally unsound business model is wrong and futile. But there’s an upside here: Twitter’s financial weakness is what gives it a chance for redemption.
Setting aside the company’s poor financial performance, and ignoring the threat to democracy that it poses, Twitter can boast some extraordinary successes. The platform is an essential element of the media and entertainment spheres, both the nervous system of pop culture and a pop-culture phenomenon itself, with 187 million daily active users. But it has never turned that engagement into a strong business.
For a time, Donald Trump’s prolific use of Twitter distracted investors from the company’s feeble business model. During his tenure as president, Trump tweeted more than 26,000 times and was tagged as often as 1,000 times per minute. The unprecedented activity reversed a slide in Twitter’s stock — but, tellingly, in the days after he was kicked off the platform, the company’s market cap shrank by $5 billion.
For Twitter, Trump was — as he has been in politics — the loudest and most prominent example of a broader trend. For years, the company has been fostering the forces of disinformation and division. A 2018 MIT study co-authored by the company’s own former chief media scientist found that false news stories on Twitter are 70 percent more likely to be retweeted than true stories and spread across the network at least six times faster. We witnessed the real-world cost of this on January 6, when thousands of deeply misinformed Americans stormed the U.S. Capitol — an insurrection that was, in part, motivated by and organized on Twitter. As a general corporate principle, you don’t want to have to list “We occasionally act as a handmaid to sedition” in the risk-factors section of your Form 10-K.
For years, Jack Dorsey and Twitter’s other top executives have been looking the other way. Numerous external researchers have mapped the spread of garbage on Twitter, and they reach a consistent conclusion: A tiny number of sources account for nearly all of the content generated on the platform. One study found that just 20 accounts (including @realDonaldTrump) were responsible for one-fifth of all false claims made about voting during a portion of 2020. Another found that just 24 external websites received 79 percent of links promoting fake news and conspiracy theories. Banning the leading sources of junk is an obvious move and would be at least partially effective — one group of researchers calculated that online misinformation about election fraud fell 73 percent after Trump was banned.
With few exceptions, Twitter has refused to do this. The company has put resources into improving its bot-detection and content-moderation tools over the years, but the periodic PR announcements about suppressing large numbers of minor accounts (which are quickly replaced) have served only to obscure the truth: Twitter has let larger and more destructive accounts run amok because the company depends on the content and engagement these accounts generate. The real issue is Twitter’s ad-based revenue model, which both is corrosive to the commonwealth and makes the company worth less money.
Because the current model prioritizes time on the platform at all costs, it produces an algorithm that amplifies enragement and polarization. Anyone who has been on Twitter will recognize the compulsion to refresh the page just one more time and get that dopamine hit, hate-reading our enemies and enjoying the glorious dunks of everyone else. The algorithm knows it too, and it learns from our every tap and dials up the doom.
Even if an ad-based model did not produce this digital exhaust, it would still be destined to fail by Twitter’s insufficient scale. The company’s reach is large compared to traditional media’s but dwarfed by that of Google and Facebook, which dominate digital advertising. Choking on the dust of a duopoly is a difficult position from which to build a business.
It’s not impossible to sell ads in the shadow of Google and Facebook — in fact, there are companies much smaller than Twitter that are prospering. Snap’s disappearing messages favor the personal over the viral, and the company is valued at nearly twice what Twitter is despite significantly smaller sales. Pinterest builds audiences within niches like food, fashion, and crafts, aligning users around sources of joy, not rage. It commands a value similar to Twitter on less than half the revenue. Neither Snap nor Pinterest is free of issues, but to date, nobody has rallied a mob to attack the U.S. Capitol using tastefully curated photos of bathroom remodelings.
Twitter is fundamentally a generalist platform, however, and will have to be proactive to move its users toward non-destructive behavior. Building a profitable business that doesn’t spew social harm will require rethinking the basics.
Facebook and Google (which owns YouTube) are in many ways far worse than Twitter. But they are vastly more profitable — they each make more profit in a single quarter than Twitter makes in revenue in an entire year. Thus the cost of cleaning up their act is higher, and the ruthlessly capitalist argument for doing so is more difficult to make. But Twitter’s inability to turn its extraordinary reach into extraordinary revenue means it can afford to change the way it does business. It doesn’t have that much to lose.
At the same time, I believe Twitter has quite a bit to gain. That’s why I’m still a shareholder (and will likely buy more), even while I’m writing an article detailing so many of the things I think are wrong with it. Twitter is already a landmark company culturally, and with some robust management, it could be appraised as one. Value is created on the platform every second. Influencers build followings, businesses find customers, ideas are generated and shaped. But Twitter, in a misguided posture of neutrality, lets all this economic activity flow across its platform and neither cultivates nor harvests it. The opportunity for Twitter — and the fiduciary obligation for its management — is to command the space that it occupies.
At the heart of my proposed revamp is a subscription model that charges accounts with followers over a certain threshold. Of course, millions of casual Twitter users provide the company with its scale, and I am not proposing the company charge them. Rather, the company should recognize that many people and organizations derive enormous value from Twitter at little or no cost. My 345,000-follower account is an important tool in my professional life and a window into the communities I care about. I’d pay a subscription fee if Twitter thought to ask for it. And I believe @KimKardashian (nearly 69 million followers) would pay more.
This isn’t just a money grab. Subscription encourages a firm to reorient its business around its users — who provide the bulk of the content that brings people to the platform, after all — and build premium features that justify collecting premium revenue. Even many casual users would likely pay a fee for better analytics, control over their feeds (such as the ability to switch easily between work and personal modes), and enhanced profile pages. The lack of innovation in the core Twitter product has been a weakness for years, but now it presents an opportunity to support a subscription fee.
Adopting a subscription model would immediately recast Twitter as a recurring-revenue firm. Analysts and investors love this model, and for good reason. Recurring revenues are more durable, more predictable, and more profitable than transaction revenues. Paying customers are more demanding, but their demands drive the product innovation essential to long-term growth, and people who pay for something are more loyal and more likely to recruit others.
As we all know, people are less awful when they are not anonymous. I believe that the most undervalued real estate on the internet is Twitter profiles. Giving users enhanced ways to verify their identities and customize their profiles would not just reduce toxic behavior and make Twitter a safer place for creators and professionals — it would create additional data for better-targeted, higher-priced ads. Whether you approach the project of reforming Twitter from the angle of reducing toxicity or of growing revenue, addressing one has the benefit of enhancing the other.
How realistic is all this? As of the third quarter of 2020, Twitter’s annualized advertising revenue was $3.2 billion. To entirely replace that revenue through subscription fees alone, Twitter would need just under 15 percent of its 187 million users to pay an average of $10 a month. Investors have called for Twitter to adopt a subscription model for years, and when the company announced it was considering such a move last July, Twitter’s stock jumped. But, true to lethargic form, when asked for an update on the company’s October earnings call, management’s response was “You’re going to see us working on and experimenting with things.”
If Twitter focuses on users, not advertisers, a host of opportunities present themselves. Today, the company provides no tools for users to capitalize on the conversations they have and the connections they make on the platform. So users are forced to take valuable activity off the network. Sensing low-hanging fruit, creator platforms including Substack, Clubhouse, and TikTok have moved in. Substack, founded in 2017, already boasts 250,000 paying subscribers for content and creators incubated on Twitter. Recently, Clubhouse announced it would be adding payment processing, and TikTok said it had formed a partnership with Shopify that will eventually allow merchants to sell products directly through the app. Twitter has been the gift that keeps on giving — to other firms’ shareholders.
Twitter’s highest-profile new feature in 2020 was Fleets, an obvious Snapchat knockoff that doesn’t make sense on Twitter and has fallen flat in the marketplace. I don’t know how much of its nine-figure R&D budget Twitter spent on Fleets, but I suspect it would have been enough to take on the verified and expanded profiles project, build a Substack clone, and simply buy Clubhouse before its valuation exploded.
Perhaps the most obvious way for Twitter to justify a subscription charge would be to acquire or create its own content. Both Spotify and Netflix’s stocks accelerated once they began investing in their own programming. Twitter is already a destination for news and entertainment content, and if it added its own — high-quality political journalism, for example — it could establish itself as the first truly hybrid social platform, blending user-generated and exclusive material. The company has dipped its toe in these waters before, airing NFL games in 2016 and pursuing a broader array of partnerships in a 2018 deal with Disney. However, as investors have come to expect from Twitter, these forays have gone nowhere.
On January 26, Twitter announced it had acquired Revue, a Substack competitor. This is a step in the right direction — if management doesn’t again shepherd the product to its graveyard of lost opportunities. Consider the breakout media firm of 2020: TikTok. Twitter had a similar product, called Vine, but management shut it down in January 2017, a year before TikTok began its ascent in the U.S. In 2015, Twitter bought the livestreaming pioneer Periscope and then mostly squandered it while competitors including Facebook Live and Twitch built businesses around the concept. Efforts to reduce toxicity have been similarly weak. Labeling false or misleading tweets has had about as much effect as the metal railings erected around the Capitol on January 6. A change intended to reduce rapid retweeting was abandoned after just a few months. Betas and vaporware with evocative names such as Bluesky and Birdwatch have not had any impact.
This is what I mean when I say that Twitter’s failure to deliver financial returns to shareholders and its status as a threat to democratic institutions are intertwined. Executives and the entrenched members of the board have simply failed. And so the overhaul begins with this step: Jack Dorsey must go.
Twitter’s CEO has repeatedly defended the company’s embrace of the status quo. When challenged about the platform’s role in spreading disinformation, Dorsey positions Twitter as a neutral platform for a global conversation. But he appears to have little interest in how this is, or might be, achieved. Less than a week before the 2020 election, when asked in a Senate hearing how much Twitter spent on content moderation, Dorsey admitted he did not know. Even after the events of January 6, according to the Times, Dorsey opposed banning President Trump. He only acquiesced after being pushed by senior members of his team, and after his own employees compared the company’s policy to that of Nazi collaborators in the 1930s.
Dorsey oversaw Twitter’s response to the Capitol rampage, according to the Times, from a private island in French Polynesia, furthering his reputation for being a disengaged CEO. On the company’s earnings calls, Dorsey can be nearly silent. On the most recent call, he spoke fewer than 6 percent of the words, according to my analysis of the transcript. CEOs of other tech companies, in my experience, are typically responsible for around half of them. Tellingly, Dorsey talks much more — and appears substantially more engaged and knowledgeable — during earnings calls for the other company he is (also) CEO of: Square.
I’ve served on more than a dozen public, private, and nonprofit boards and led several activist campaigns to replace directors at publicly traded media and technology firms. Originally, I thought about bringing these points up, as I did in December 2019, in a letter to the board. But activist letters typically end with a hollow attempt to claim the high ground and state something to the effect of, “We look forward to a productive dialogue and hope we can work constructively together.”
I don’t. Twitter’s management, enabled by legacy board members, has demonstrated an obscene lack of regard for the commonwealth, impotent strategic thinking, and an inability to capture a fraction of the shareholder value present on the platform. I find management’s actions — and inaction — irredeemable, and that’s as both a shareholder and an American citizen.
*This article appears in the February 1, 2021, issue of New York Magazine. Subscribe Now!