The Changes at Twitter: A Product Manager's Perspective
A new version of its subscription service, 50% of its staff fired, and more than a few ambitious plans. What Twitter is changing, and where it needs to succeed.
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Recently, a lot of changes happened at Twitter. Much started with Elon Musk getting more interested in the platform, buying stocks of it, joining its board for a few hours, then sending a letter of intent to acquire the company. Quickly after, Musk tried to walk back on this goal, blaming misreported bot numbers as a cause. He finally acquired the company, partially to just avoid an uncomfortable trial. And since then, many new product initiatives have been started, and half of the global staff has been fired.
Messages from the earlier court materials let us peek into Musk’s fundraising style:
Elon Musk: Any interest in participating in the Twitter deal?
Larry Ellison: Yes… of course 👍
Elon Musk: Roughly what dollar size? Not holding you to anything, but the deal is oversubscribed, so I have to reduce or kick out some participants.
Larry Ellison: A billion... or whatever you recommend
Elon Musk: Whatever works for you. I'd recommend maybe $2B or more. This has very high potential and I'd rather have you than anyone else.
Larry Ellison: I agree that it has huge potential... and it would be lots of fun
In the article below, I’ll be going through the rumored changes to Twitter, what those may mean for the platform, and highlighting some of the coming risks and opportunities.
But first, let’s start with how Twitter is doing as a business.
Twitter’s business not doing so well
While Twitter was founded in 2006, it didn’t turn to profit until late 2017. And even then, the profitable years didn’t last long, with 2019 marking the last one.
In the earnings call for Q2 2022, Twitter published a revenue of $1.2 billion (1% year-over-year decline), but $1.5 billion in costs (31% year-over-year increase). With a workforce of around 7.500 employees globally, the business was not doing so well.
Twitter mainly relies on advertising as a source of revenue, around 90% of its total income. The remaining 10% comes from data licensing and other revenue streams.
And when Musk sent his offer to take the company private for $44 billion, he effectively valued the company at $54.20 per share. As a reference, Twitter’s stock traded at $39 on 1 April, just before Musk disclosed his stake in the company.
After the acquisition, just in the last few days, Twitter also warned employees that “bankruptcy is not out of the question” for the company, so they should expect aggressive timelines from Musk.
The Tesla owner’s plans so far
After sending the first offer, but before actually acquiring Twitter, Musk said quite a few things about what he plans to do with the company. He said he wants to democratize free speech, that making money out of Twitter doesn’t matter, and that he wants to build an “everything app”. This is something similar to China’s WeChat app, where users can message people, take care of mobile banking, pay for items online, play games, or post videos—so they can take care of almost everything.
And on the night of 27 October, Musk completed the acquisition of Twitter.
In the few weeks since then, the Chief Twit surely made a lot of changes to Twitter as a company and its product plans. While he originally stated that he was not buying the company to make money, one of the first initiatives points in the other direction: making Twitter’s subscription service more expensive, Twitter Blue.
The new version has started rolling out in some markets already and offers a verified check mark along with other upcoming benefits, like boosted post ranking, for $8 per month. And that’s the same blue check mark that was previously only held by well-known companies, celebrities, and other notable individuals—indicating authenticity.
Another idea that Musk instructed engineers to look into is to bring back Twitter’s failed short-form video startup, Vine. The startup was acquired by the social platform in 2012 but was shut down in 2016 due to lackluster growth and adoption. And seemingly, Musk is not only interested in short-form video but also in long-form too. Leaving public comments that point in both directions.
As a declared “free speech absolutist”, Musk also plans to open up Twitter by cutting back on the level of moderation on the platform. Originally, people questioned whether he’d bring back previously suspended users instantly, but in reality, all that happened so far is that he started to set up a moderation council.
And just a few days ago, Twitter fired 50% of its employees due to cost-cutting. Another sign that Musk actually cares about how much the company makes.
Last but not least, most recently, Musk detailed how he’d plan for Twitter to enter the payments space in an employee all-hands: making something like a “Twitter balance” available inside the platform and accepted by selected online partners. Plus, providing a debit card that works for offline transactions.
A product manager’s perspective
Twitter as a platform started shifting into something new mere weeks after Musk’s acquisition. This might get fans excited or critics worried—including companies who are spending big bucks on advertising.
My take? The company is moving fast with a leader who is not caring about corporate etiquette. But it’s also exploring many different product directions simultaneously, which doesn’t look good for an unprofitable company.
The new Twitter Blue will create an elite circle of people who are willing to pay $8 per month to stand out from the crowd, both visually and algorithmically. So probably, there will be a decent interest in the repackaged service, and I’d expect Twitter to make more money out of it than from the previous version. But still, not a ton.
People like to pay for fancy online badges—just look at the early NFT market.
But as Casey Newton highlighted, there might be some problems around the math:
“Other employees have warned about a secondary feature of the new Blue that Musk added at the last minute: reducing ad load in the Twitter app by half. Estimates showed that Twitter will lose about $6 in ad revenue per user per month in the United States by making that change, sources said. Factoring in Apple and Google’s share of the $8 monthly subscription, Twitter would likely lose money on Blue if the ad-light plan is enacted.”
One challenge about the offering’s blue verified checkmark is that previously this symbol was only held by notable individuals and companies whose identity was Twitter-verified.
Now, the blue checkmark may mean two things: a verified user or someone paying $8 per month. Unfortunately, users won’t be able to figure the difference out unless they go to the user’s profile and tap on the symbol for an explanation.
Or maybe they would? Twitter rolled out an additional “Official” badge for verified accounts, but then Musk killed it, and then Twitter rolled it out again. Again, within days.
As expected, abusers took the very first day to prove that a blue checkmark without verification might raise a very real problem. Quite a few accounts changed their names to the likeness of brands and celebrities, posting content that would be unexpected from the real accounts. And this might hurt advertisers’ interest to spend on the platform if Twitter cannot guarantee brand safety. Especially bigger companies that are more likely to be targeted by bad actors.
If you thought Twitter had a crypto scam problem, think how big it can get now.
With the recent events leaving only ~4.000 employees in control, and a top leader who likes to dictate priorities and has very high expectations, Twitter remains a sizable company that is required to move with the speed of a startup.
While some temporary rush can be expected with the owner change, Elon Musk is clearly bringing a new culture to Twitter, something that he has developed at his other companies. And the one that doesn’t include working from home.
Twitter surely needs new revenue streams to turn to profit again and have enough cash in the bank to finance the ambitious growth Musk is dreaming of. The platform will likely rely on advertising money for many years to come, but it’ll be interesting to see how much it can gather from subscriptions. While the new Twitter Blue is a start, its earnings won’t reach the levels of the primary revenue source.
Subscription businesses usually don’t cross a certain percentage of total users. For example, even YouTube, with its 2.1 billion monthly active users, only gathered 80 million paid subscribers for its YouTube Music and YouTube Premium packages (including trials) which leaves paying users at 3.8%.
But Twitter has a strong incentive to make more money, and Musk will take every reasonable opportunity to do so, even if it brings trouble with the law and regulations.
Will Twitter follow LinkedIn’s playbook and open up more messaging and insight functionalities for a good price? One can imagine having to pay for Twitter to message people outside our circle, better statistics, and features for power users.
But this is still far from the Chief Twit’s “everything app” plans. And the recently discussed initiative to turn Twitter into a bank is months (if not years) away.
To start growing the business again, Twitter needs aggressive user growth first.
But some users are fleeing the platform and looking for alternatives like Mastodon. So the question is: can Twitter keep its user numbers under control and start growing again?
One thing is for sure, Twitter will be changing fast in the coming months. It’s like an oversized product experiment: will the new version work better than the old one? Time will tell.
The social media platform needs to transform while keeping its users and advertisers happy, so the revenue keeps flowing in. And at the same time, kick off ruthless cost-saving initiatives.
If Musk wants to reach $26.4 billion by 2028, better keep track of that revenue!