Packy is a self described "narrative investor" and so does not do anything remotely close to objective analysis. But his is still a nice recap of what Twitter has done recently and could continue to do.
2020 was a good year for Twitter. Since Elliott Management and Silver Lake took board seats in March, $TWTR is up 94%. As of Q3, the company had 187 million monetizable Daily Active Users (mDAU) up 29% from the previous year. For context, Facebook grew DAUs by 12% over the same period, albeit off a much higher base.
At the start of the pandemic, Twitter decided to prioritize its revenue products, and after a slow Q2 due to the pandemic, the company roared back. Revenue grew 14% YoY to $936 million in Q3, smashing estimates. Twitter has mostly focused on brand advertising to date, but aided by the rebuild of its ad server, it has started rolling out direct response ad formats, and will launch a new Mobile Application Promotion offering this year. It’s also working on tools to let SMBs better self-serve ads, overhauling what has traditionally been an absolutely terrible product.
It might be working, too. Last night, @nongaap highlighted a few ads during the Super Bowl that seem more targeted, timely, and relevant than anything I’ve ever seen on Twitter.
If Twitter finally gets ads right, that’s a huge tailwind, but the most exciting thing about Twitter is that it’s started making moves against the Fantasy Jack Twitter Roadmap.
Verification. After nearly four years of letting verification languish, shrouded in uncertainty, Twitter announced in November that it’s bringing back its verification program. It will keep its focus on organizations and influential individuals for now, and isn’t moving all the way towards verifying all real people and companies, but it’s a step in the right direction that shows it’s listening to users.
Subscription Products. While Twitter hasn’t launched any subscription products yet, it has publicly announced that it’s planning to, and that it’s being more thoughtful about it than the Prof. At the Oppenheimer Technology, Internet, and Communications Conference in August, CFO Ned Segal said:
When we think about subscription, I wouldn't want you to think too narrowly about the opportunities. There could be subscription opportunities for advertisers. There could be subscription opportunities for consumers. There could be -- whether they are people who use the service a lot to create content or those who tend to be viewing content more or those who are somewhere in between. We don't feel constrained when we think about these opportunities, and I wouldn't want you to think so either.
Notice that he didn’t mention Kim Kardashian’s 69 million followers once, but he did highlight Creators.
Products for Creating, Sharing, and Monetizing Ideas. This is where Twitter has gotten most aggressive recently. Let’s break it out.
In If I Ruled the Tweets, we suggested that Twitter should build or acquire products for newsletter creation, podcast consumption, and audio-only rooms, among other things. After years of soporific product development, they’re actually starting to make moves!
In December, Twitter acquired social screen-sharing app Squad and announced the launch of Spaces, its answer to audio-chat unicorn Clubhouse. Spaces lets Twitter users host conversations directly within the app, and the Squad team will work on the product.
Combined, these moves point to a more confident Twitter, that, election behind it and Trump out of its hair, is focused on the future. It is going to build Creator-focused products and diversify its revenue streams. The pieces are starting to come together.
Twitter’s Creator Bundle
With the launch of Twitter Spaces and the acquisition of Revue, Twitter is building a Creator ecosystem in which it keeps some of the value it creates. It’s competing with two hot, a16z-backed startups, Clubhouse and Substack, to own the conversation and the associated monetization opportunities. I think it will win the newsletter wars, which will give it a leg up in the audio wars.
When Twitter acquired Revue, Ben Thompson wrote about the acquisition, calling it “the smartest thing Twitter has done in ages.” I agree. In If I Ruled the Tweets, I used Twitter’s relationship with Substack to show how much value it gives away, writing of the fact that most Substack discovery happens on Twitter:
Who’s capturing the value here?
The writer captures value in the form of a new free or paid subscriber.
Substack captures value in the form of new paid subscribers and new writers.
Twitter captures almost zero value. You could argue that it captures a little in the form of increased engagement that it can sell ads against, but when one of its users sees a Substack post and clicks the link, she leaves Twitter and gives her attention to Substack.
Substack is in a tricky position. For writers to stick with Substack when they get big despite the 10% fee Substack charges, it will need to help them drive growth. The most effective tool that Substack has built for discovery, though, is a tool that helps people find Substacks by people they follow on Twitter!
Twitter can make the whole newsletter discovery experience more seamless and integrated by doing it all within the app, as Thompson lays out well here:
Personally, I’m watching closely and would love to switch to Twitter Newsletter as I learn more about the company’s plans for the product. It’s where I promote Not Boring anyway, and connecting with Twitter would allow me to find new readers more easily, and connect with and learn more about all of you.
For new writers, Twitter is trying to make it as easy as possible to start a newsletter, already highlighting it in the “More” menu on the web version of Twitter.
At the same time, Twitter is preparing to do battle on the audio-room front with Clubhouse via its Spaces product. It’s still in limited beta, but one of the early testers, Chris Cantino, wrote a good breakdown in Twitter Spaces: A Bright Future.
Like Substack, much of Clubhouse’s growth has come on Twitter’s back. The product initially took off when a small set of influential users shared screenshots of the app on Twitter in the spring, creating FOMO and demand, and still today, Twitter is the main distribution channel for Clubhouse. When Elon Musk went on Clubhouse last weekend, he let people know… on Twitter.
The conversation about the conversations in Clubhouse also happen on Twitter. When I woke up the morning after Elon’s appearance, my entire feed was Tweets about what Elon said, or when he brought Robinhood’s Vlad Tenev on-stage. Clubhouse hosts even take audience questions on Twitter.
Twitter should be able to close the loop - go live, join the conversation, ask questions, and tweet about the conversation, all in real-time, in one place. Record snippets of public conversations and tweet them directly. DM other participants.
Critics argue that, yes, a theoretical Twitter could do that, but actual Twitter, the one that acquired and squandered Vine, can’t figure out search, and let DMs turn into a complete warzone, cannot. Twitter can’t build product, they say.
I’m more optimistic about Twitter’s potential here
