Twitter was not in a financial nosedive until Elon saddled the company with $13B in loans (used to acquire the company) while also tanking revenues by scaring off all the big advertisers who think the platform won't be brand safe in the free speech future. He did that himself. He also gutted engineering teams at Twitter, so their ability to execute quickly on whatever his new vision is seems in jeopardy. I predict Twitter is going to $0 and probably a lot sooner than you might expect.
I’m betting on the opposite. If it doesn’t completely fail just trying anything is likely an improvement. I’ve never spoken to anyone who liked Twitter. It’s always just a means to an ends
Agreed. He probably didn’t let go many infra people. If some product teams were reduced in size and will become slower at butchering the UI, the user will only benefit.
Reddit has a similar number of MAU and 1/10 the number of staff Twitter had. And I don't think their tech stack is all that spectacular, probably worse than Twitter's. Yet, their site runs just fine.
The fact that Twitter just raptured away 50%+ of their workforce and things are still running mostly the way they did before indicates, to me at least, that Twitter must have been one of the better-run engineering orgs on the planet.
I would hope that their production deployments are fairly stable. If the app was crashing and riddled with known bugs at this point they’d be one of the worst run.
I wonder how many redundancies are for technical roles and how many are for non technical roles (the "political/editorial wing" of the company such as the "curation team", the "human rights" team).
A couple of former Twitter people I know have made similar comments hearing that plenty of good ops people were cut. That sounds like the usual PE death cycle getting started: they’re not critical to daily operations so things are fine and you can say “look, I’m a smart manager” until something breaks. After a while, customers get tired of declining service and the process accelerates.
The thing is, isn't this an universal phenomenon across the entire tech industry over the past 2-3 years? After the initial pandemic onset panic, company valuations skyrocketed and so did the demand to increase headcount.
Isn't everyone at risk, except for those at companies that have already had layoffs?
Not just the past 2-3 years. Many people at google semi-half-joked-not-joked that they could cut half the staff without a single dollar of revenue disappearing back in 2014-2015 time period.
The question is : why did these companies hire massively in the pandemic era ? It was clear that cautiousness was the best policy. Not in hindsight, but even at the time. Did tech CEOs suffer from a kind of mass hallucination?
I don't think that's clear at all. Social media is a competitive game and if all your competitors are staffing up, you're going to get left in the dust if you don't do the same. Cheap money was helicoptering from the sky in those days, so why not?
In the last decade, the (stock and private) markets rewarded growth (not profitability). Operators were not compensated on efficiency or revenue per employee. There was no expectations of dividends or profit. As a matter of fact massive spend for growth drove stock prices higher so that's what everyone did. Jack was complicit in this ultimately bearing responsibility however this was the status quo in the growth at all costs era of tech.
Sadly seems to be the way of the world in general.
Growth at all costs.
Heck even if you grow at a smaller percentage of what you grew by the year before the markets get spooked and the headlines of doom begin, even for companies doing insane numbers.
Not the way of the world, but the way of the world in a zero interest rate environment.
Every tech company hires aggressively in a low interest rate environment for two reasons.
1. Money is cheap
2. Bonds return negative yields so all the money flows into risk assets that grow aggressively. Profits don't matter in this environment.
Those that weren't in the workforce prior to 2008 will now learn the importance of profit as interest rates rise to rates we haven't seen in decades.
I doubt the Govt would legislate anything unless there is a sustained multi-year depression. They won't be able to react with new laws in a short time (at least under Biden and democratic congress). Whether companies will opt to hire H-1Bs or citizens is likely a cost decision. Existing employed H-1B renewals is totally dependent on company/individual performance.
Also, Jack deserves credit for roping in Elon and selling Twitter at $44B at peak market. Every employee (with stock options) got some of that upside. Assuming the $4M per day loss is accurate, any CEO would be forced to make cuts in this economic environment. I credit Elon for doing it all at once rather than doing a cascading series of layoffs. That said, I feel for everyone who lost their job...
The rumour is that a significant part of the losses is that Elon spooked advertisers, so their ad spend dropped off a cliff. So what was a marginal advertising platform last years is a massive mess now.
Oh and Musk used something >$10Bn worth of loans to buy twitter, so they immediately have a new $1bn/year interest payment to make. That's 3 mil a day alone (check my maths).
Twitter was profitable before this happened, even with the increased headcount. It seems like all the loans Elon took out put a noose around Twitter for no benefit to the platform at all.
Yah. Buying a platform for 4X it's worth in a leveraged buy-out, antagonizing it's primary revenue source while firing half it's staff to roll-out a monetization strategy that 80%+ of 1M+ respondents said they don't want isn't exactly an inspiring start.
We should not be so sensitive as a society that we expect people in powerful and significant positions to conceal truths to protect feelings. Dorsey is, possibly, giving a candid thought on a major American company that he has unique insight into - that's worthwhile.
If Dorsey was ranking employees by the pleasantness of their odor or by how attractive he personally found them - I'd agree. No value, even if true, it could hurt feelings and you shouldn't say it. That's not what this is though.
These consequences-free "I take responsibility" among C-suits is becoming too common. if he really felt responsible for screwing up as CEO, he should be splitting the millions he had received in compensation with people who are laid off. Show some action instead of just making appearances.
In this market 3 month severance is not much. Much of the value of these big tech jobs is in unvested stocks that these people will lose entirely (i.e. rewards for most of the work they did during almost half decade) while CEO who screwed up in overhiring walks away with golden parachutes and full vesting. Every big and small tech has now hiring freeze. Many of these people moved to expensive SF area with their entire family.
It's because the employment contract specifies it that way.
If the employment contract says "If you fail, you will need to return all of your compensations", then nobody would agree to work for you.
Now they agree to work for you under the assumption that they will not return what they've earned... then we want to reverse that retrospectively. The contract was signed years ago, but well we are going to change it now. Please return every penny we paid you. That's kinda fucked up to be honest.
You are right. But the problem is not that they don't have responsibility. The problem is they often claim to be paid so highly because of the responsibility.
C-Suits are different than ground workers. They get golden parachutes, you don't. They get full vesting at firing, you don't. C-suits get paid for company performance, while you get paid for the task done. Ton of C-Suits simply get paid for growing fast (aka hypergrowth aka overhiring). They pose this as performance and take home millions. These millions should be returned when they admit that the growth they claimed was simply overhiring.
It doesn't matter because that is not what was agreed at the time of employment.
You are trying to apply your idea retrospectively without any prior agreement.
Now moving forward I can see your idea being implemented but be prepared for c-suite's compensation to skyrocket even more because the downside is much higher... The upside has to be much higher as well.
> You are trying to apply your idea retrospectively without any prior agreement.
You misread them, they didn't write that money should be taken from him but rather that he should willingly donate it to be in line with his statements. More so, it was probably just a stylistic device to make a point.
Exactly. Absent any consequences that affect him to the same degree that losing their jobs affects the laid off employees, this is just a meaningless attempt at virtue signalling.
I mean, I'm sure there's an element of truth to that, but I also wonder whether post-Musk Twitter is just on a different footing and trajectory than public Twitter. Public Twitter had to concern itself with Twitter's competitive position among the other tech media giants. It made sense for them to be doing a bunch of research projects, AI, AI ethics, moonshot platform projects, and product launches that might not pay off for 4+ years but also served as competitive hedges against, I don't know, TikTok or Substack or whatever.
Post-Musk Twitter can't really afford to do any of that stuff, at least not on spec. They're running (I think by necessity?) a classic private equity playbook here: figure out the core revenue drivers and strip out everything that isn't directly associated with them. Bring costs sharply down, wait for revenue to stabilize, pay off the loans, and then figure out what to do with a much more "efficient" company?
All this just to say: I'm sure they probably did grow Twitter too big. But even accounting for that, private Twitter just has different needs than public Twitter, right?
(The layoffs appear to have been done cruelly and capriciously.)
Saying post-Musk Twitter is using the private equity playbook assumes that Twitter is being handled according to a playbook rather than being done by an incompetent narcissistic sociopath who hyped his way to being a very overvalued) billionaire, bought a company on impulse, and is now has to make more money off Twitter than is likely even possible in order to pay back said loans.
I don't like him either, but I don't subscribe to the Musk model where he's simply a chaos agent with no regard to consequences of any sort. He didn't want Twitter and got locked into buying it after losing a game of chicken, and now he's scrambling to make some sense of what he's got.
Musk bought Twitter with the same results a redneck buys a jacuzzi at the county faire - it was an expensive impulse purchase and the moment after buying it all your left with is regret
The layoffs are necessary but temporary. He plans to grow head count to 11k.
He has a plan. It's not a whimsical or egoistical purchase.
He started executing on that plan the day the deal closed. In 2 weeks Twitter will have shipped a major feature ($8/mo subscription). For context: edit feature took Parag more than a year.
The NYT story and numerous hints Musk dropped about his plans for Twitter directly contradict your "private equity playbook" confabulations.
Well, if he had a plan for right after purchase, he does seem to be executing on that plan extremely poorly. He has seemingly no revenue plan except charging his verified users $8 per month (down from the original $20), and it’s not even going to cover the interest rates of the loans he took out. So he has some real catching up to you to really make some money.
You can tell from the riffing with Stephen King that there isn't really a plan beyond "grow revenue". The $8 figure was pulled out of thin-air in response to criticism.
The most brilliant part of his plan is how he is needlessly antagonizing his own advertisers and threatening to send his crazed followers after them.
That is how you grow a business. I'm sure the advertisers will come running to make deals with a man who may or may not lash out at them publicly and send his followers to attack them in the future over any disagreements.
Sure. And he's going to take Tesla private and he's going to run SpaceX from his new HQ on Mars. What did you think he was going to say to investors? "This is a disaster and we're all going to lose our shirts"?
TikTok is projected to have a net revenue of 18B in 2023 (23B in 2024)…and that’s mainly from ads. Mastercard revenue is around 18B. If you think Twitter can hit 26B revenue in 6 years, I have a bridge I would like to sell you.
Well, you are missing the fact that Musk ordered Twitter to reboot its short-form video app Vine. Expect tens of billions of dollars in revenue by 2028!
Let me add to that list:
-- FSD promised Q1-Q2 2017 (never delivered)
-- Model 3 will cost $35,000 (starting price >$45,000)
-- Summoning your Tesla will be available around 2018 (never delivered)
-- No people in the actual Tesla production will be involved (Tesla employs thousands of people in production process. Elon has went back on this)
-- Tesla won't be needing another financing round (~20 more financing rounds happened after this announcement, at an avg of $1b)
-- By 2020 a Neurolink device will be implanted into a human skull (never happened)
-- One million robotaxis by 2020 (never delivered)
and so on and so forth. I dont care for his hyperloop shenanigans ("will never happen" to all of those announcement) nor his Mars dreams, but those are the ones I can think of. There are many more broken Elon promises.
Elon does deliver though. There's no denying that he does deliver good products.
Are the assumptions in this plan really realistic, though? A cornerstone to these numbers seems to be the $12B in subscription revenue from the mysterious Product X with 104M users, hinted to be the ad-free "Twitter Blue" that just launched. (Pricing is pretty consistent as well - $12B in revenue with 104M users implies ~$120/month = ~$10/month.)
Subscription-based social networking has been tried before: that was the revenue model for LiveJournal/DeadJournal/uJournal/SomethingAwful/Flickr/Del.icio.us 20 years ago. People do pay for it - but only a couple percent of people will pay for it, and that was for companies that charged more like $10/year rather than $10/month. Worse, social networking is a network-driven business where the utility of the product increases the more people that are on it, so if a subscription-based business model results in fewer total users, you end up losing out to a free ad-supported model. This was exactly how MySpace and Facebook totally took over from LiveJournal & Flickr.
It's possible that 20 years makes a difference, and the userbase now is fundamentally different from it was 20 years ago. But I wouldn't bet on it - if anything, the masses are less willing to pay for entertainment than they were 20 years ago, because they have less money. I'd chalk this one up to a businessman with lots of money and experience in other businesses entering a business that he knows nothing about and assuming his experience is transferrable.
> In 2 weeks Twitter will have shipped a major feature ($8/mo subscription).
Do you mean that he is planning to increase the subscription price for an existing feature called Twitter Blue? Why do so many Musk’s fans have the urge to constantly exaggerate his impact?
> Cut Twitter’s reliance on advertising to less than 50 percent of revenue
He’s definitely reducing reliance on advertising considering how poorly ad sales are going. So we’ll soon be able to mark that one as a « win » I guess. /s
what AI? what platform, they crippled it and shat on developers. The best thing to come out of twitter was Bootstrap
I think Musk plans to change the nature of twitter. He could build a substack and onlyfans clone for starters, but i think his ultimate goal is to make it the Wechat of the US
I think a lot of people are going to jump in here making this same point, so just to clear it up: what I'm saying isn't incompatible with any grand design Musk might have on Twitter.
I personally think Musk ended up with Twitter because he lost a game of chicken with Parag Agrawal, for whom there should be a marble statue erected in Bowling Green commemorating him as a hero of shareholder value. You can think otherwise. You're wrong, but it doesn't matter! We can arrive at the same analysis.
Whatever Musk's grand strategy is, his first order of business is to strip Twitter down to some efficient core. He'll want to put his own big plans in place, not Parag's. Even if you think Musk really wanted Twitter, he certainly didn't want it because he thought there was a lot of value locked up in Twitter's internal plans.
The point is just: Twitter was bound to get a bunch smaller in the near term because the first order of business here is to do a reset, and to shake off all the long-term bets Twitter was making. Public Twitter had to make those bets; otherwise, the only way to value it would be on the ad revenue it was already bringing in.
I think Elon did not so much lose a game of chicken than he threatened to make Twitter share price increase if the Twitter board didn't do what he said.
I cannot discount that Elon may have a master plan here but it did seem he was being outplayed every step of the way because he was so... Elon?
> Post-Musk Twitter can't really afford to do any of that stuff
What if it doesn’t need to?
Chances are 99% of the users use the basic functions, and are just happy with the average twitter experience.
And I’ll tell you what there are even public people that post ok twitter against their will (I’m thinking of journalists and authors that post on twitter because their employer/editor requires them to do so).
Most likely the true value of twitter is the network effect and its critical mass, not much the fancy ai stuff or whatever.
It might not need to! I'm mostly not making a value judgement. There's just a narrative about how the layoffs and cost cuts are shedding "bloat". Some of it probably is bloat: Twitter was not regarded as especially well-managed. But a lot of it is stuff that public Twitter probably had to be doing, to satisfy the market, but post-Musk Twitter doesn't need to do.
Side-question: Is it normal to write [sic] after an alternative but not wrong spelling of a word? Jack is American, and uses American English, which I guess is against the BBC's style guide, but "I realize [sic]" seems to be going too far?
it's to indicate that the text quote is as-written (which may not necessarily be a _mistake_), and from the perspective of the BBC, "realize" isn't alternative, it's just wrong :)
Yes it is normal. It doesn't necessarily imply the wrongness. It's an unusual spelling in British English and the annotation tells you the spelling is reproduced verbatim rather than someone at BBC mistyping it.
Same for "apologize [sic]", in the same paragraph. That's a bizarre decision by the journalist or editor. Will they [sic] every ou vs. o and s vs z?
I'd either ignore it, or just change the quote to British English, I assume that's not going too far.
edit: apparently it is going too far. Quoting across the Atlantic is a common issue faced by writers, and it seems the consensus is that you always just quote letter-for-letter.
I do not know if it's normal or not. Certainly I don't think I've ever seen 'sic' being used on American spelling like that ever before. It stood out to me as strange, and I even remarked to the wife, 'Have you ever seen the BBC add "sic" to American spelling before?'
Brits are completely aware that Americans spell things differently, personally I don't feel it needs pointing out. Makes it look like the writer thinks Jack is wrong!
Googling "BBC using sic for American spelling" brought me to your comment, and looking at the other results it doesn't look like they do it all the time. Seems silly to have done it at all!
I wager it get's edited away before the end of the day.
We got traction but will figure out the profit for later time. That is Twitter’s legacy that is going to change from the foundation. Jack is an idealist
This strategy did not start with Twitter and won’t end with this acquisition. Tech startups will keep betting on capturing the market first and getting to profit later. Not sure this specific fact makes Jack an idealist.
The fact that this was prolonged for a decade seemed like unfinished puzzle. Every founder should have a vision, idealist in good sense, numbers don’t matter sometimes.
For sure. It is frustrating to watch Twitter struggle so much with introducing meaningful monetization streams. Saying that, things probably seem simpler and more obvious from the outside.
Jack is an idealist in a very stubborn way. He sacrificed too much of Twitter’s reputation and neutrality by fighting for questionable causes.
I feel like the whole Musk buyout debacle has shown us once again how lacking all of our emperors are in the wardrobe department. So tell me again why we have to make headlines out of their shower thoughts.
The linked article has an interesting "out" for WARN protocols using an "unforeseeable business circumstances" exception, such as the "free get out liability" ace twitter/musk received with advertisers pressing pause.
If the irony of that just dawned on someone, you're welcome :)
A simple analysis of day 1 to day 3 operations makes that a quick thinking decision.
Wasn't the company a wild success? They sold out at peak bubble pricing. With a slower growing company could they have dumped it off on someone for as much? The large number of employees even made it more enticing for an acquirer with bad timing who figured he could cut his way to profitability.
This situation for Twitter is closer to winning a lottery than to being a wild success. The fact that they locked in the offer at that price point and then the market crashed is pure luck (with a ton of work from smart lawyers), but it’s not the result of some brilliant long term strategy.
reply