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Elon Musk Raises More Questions About Twitter’s Approach, Which Could Lead to a Big Shake-Up

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Elon Musk Raises More Questions About Twitter's Approach, Which Could Lead to a Big Shake-Up

If nothing else, Elon Musk seems determined to shake things up in his time as Twitter’s prime shareholder, and see what he can make happen, which could set the platform on a course for internal angst and user disruption as Twitter’s various chief try to find ways to placate the latest member of their board.

But before we get into Elon’s latest recommendations for the platform, it’s worth establishing where Twitter is at, and what its current goals are, to set a clear understanding of the stakes.

Back in 2020, investment firm Elliott Management purchased a 4% stake in Twitter – worth around $1 billion at the time – with the intent of forcing Twitter to oust long-term CEO Jack Dorsey and replace him with a more business-focused leader, with a view to maximizing the app’s performance.

Elliott’s view was that Dorsey, who is also the CEO of Square, was unable to give the company the attention it requires while operating in both roles, so it bought up shares in order to push him out. Eventually, Twitter’s management negotiated a peace deal of sorts with the Elliott group, which involved Elliott and Silver Lake Partners both gaining a seat each on Twitter’s board, and saw Twitter set ambitious new growth targets, which, presumably, also held significant penalties for Dorsey and Co. if they could not be met.

Those targets were shared publicly in February last year:

  • 315 million monetizable daily active users by Q4 2023 (Twitter currently has 217 mDAU and added 18m in total in 2021)
  • $7.5 billion annual revenue in 2023 (Twitter made $3.7b in 2020 and $5.1b in 2021)

As you can see, those are some tough targets, and it may be that the pressure placed on the company as a result of Elliott’s push lead to Dorsey’s decision to step down as CEO in November last year. Dorsey was replaced by CTO Parag Argrawal in the role, and that could, in some respects, have given the Elliott consortium what it wants, which could have eased the pressure on the company – but then, shortly after his appointment, Agrawal re-affirmed that Twitter would maintain these growth targets in Dorsey’s wake.

So Twitter already has a tough road ahead of it, especially on user growth. And into this comes Elon Musk, who bought up a 9% stake in Twitter late last week. That’s double the holding of Elliott Management, and more than Elliott and Silver Lake combined, giving Musk a significant voice in the company. Twitter quickly appointed Musk to its board, amid concerns that he could look to buy-up even more shares, and take a controlling interest in the company (Musk’s appointment to the board limits him from buying more than 14.9% of the company).

And now, we’re in this new reality, where Musk’s voice could hold significant sway in the company’s future direction.

And he’s wasted no time in making provocative claims and assertions ahead of his first AMA with Twitter staff next week.

In a late night flurry of tweets on Saturday night, Musk noted that:

  • Twitter’s most popular accounts, based on follower numbers, are not very active, which prompted the question – ‘is Twitter dying?’

This comes after Musk shared a poll earlier in the week, in which he asked if Twitter users want an edit button, which more than 4.4 million people responded to (74% in favour). Twitter then noted that it is, in fact, working on an edit button, and has been for some time, but Musk’s poll once again underlined the public pressure that he could put on the company, which he can also now use to back-up his views and opinions in Twitter’s board meetings.

Musk’s array of ideas could certainly cause some headaches, and planning restructures within Twitter HQ.

On the first point, that Twitter’s most popular users are not active – Twitter’s already working on this, by adding in new incentives to get people to tweet more often, including Super Follows, tipping, newsletter integration, on-profile product displays and more. Those probably won’t get the Justin Bieber’s of the world to be more active, because they’re won’t necessarily be incentivized by these revenue programs, but they could get more mid-level influencers more active, which could make Twitter feel more ‘alive’ once again.

Maybe. It’s hard to say how effective things like Super Follows will actually be, but there’s not really a good solution to get more high profile users engaging more often. If Musk has any ideas on that, no doubt Twitter’s management will be keen to hear them.

On the second, that Twitter should add an alternative checkmark for paying users, this idea has been floated many times, that Twitter could verify users that prove their identity, not with a blue tick, but with something else, in order to legitimize their presence. Making this a paid option probably isn’t the best way to go (as it could incentivize scammers), but maybe there could be an argument for variable indicators based on proof of identity, which could put more onus on accounts to confirm their details, thereby lessening the impact of fake accounts and bots who wouldn’t have it.

Which leads to Musk’s last point (I can’t say much on the idea that Twitter’s home base should be re-used for another purpose), that there are too many bots and scam profiles in the app, which impacts the user experience. This is likely true – according to previous estimates, around 15% of active Twitter profiles are likely bots, while bot accounts have also contributed up to 60% of the tweets around politically divisive topics at times.

That’s a significant problem – but at the same time, would removing them be in Twitter’s best interests, from a metrics standpoint?

As noted, Twitter’s looking to add almost 100m active users in the next year and a bit. Removing 15% of its active user base – equivalent to around 32m profiles – would clearly impact that strategy, making it virtually impossible to reach.

But maybe it would be better for Twitter, overall, to attack this more vigorously? Maybe it would be better to remove bots entirely, even if it reduces the user count – but then again, we don’t know the penalties that Twitter’s management could be facing if it fails to meet these benchmarks.

Could Musk convince Twitter’s board to change direction on this, if Twitter were to combat bot profiles?

That then leads to questions about identifying and removing bots definitively, which would undoubtedly lead to some false positives, and likely some reduction in engagement, at least in the short term.

Such an approach could work, in the longer-term view, but would Twitter’s other shareholders have the patience required to re-structure this element?

These are the types of questions that Twitter’s going to have to weigh in the Elon Musk era, and while they could well lead to systematic improvements, they could also cause some major headaches for Twitter’s management in the upcoming quarterly reports.

And then there’s the censorship element, and Musk’s potential influence on Twitter’s stance on moderation and removing accounts that break the rules.

Musk recently questioned Twitter’s adherence to ‘free speech principles’ which he noted are fundamental to democracy.

Musk was also a vocal critic of Twitter’s banning of former US President Donald Trump early last year.

Interestingly, the founder of Elliott Management, billionaire investor Paul Singer, is also a “Republican mega-donor”, who, while he was initially opposed Trump’s policies and approach, eventually came around to backing the former leader.

So now you have at least two elements in Twitter’s board room who, at a glance, would appear to back a more ‘free speech’ approach to moderation at the app.

That could spark big conflicts, especially as social platforms now seem to be generally in agreement that faster action is required on potentially harmful movements, in order to quash them before they gain any traction.

Platforms took too long to address QAnon, allowing it to spread, and infect more people via their networks. They have not made the same mistake on anti-Ukraine propaganda.

Will Musk’s appointment be a step back on this element, and allow more dangerous speech to take hold via tweet?

Certainly, right wingers are happy with Musk’s board ascension, and with the pending failure of Trump’s ‘Truth Social’ app, they’ll be keen to see if Musk can reinstate some of their past freedoms, at least in a perceptual sense, within the app.

No matter what, Twitter certainly looks set for a shake-up – but whether the end result is actually a better experience, we’ll have to wait and see.




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Pitfalls of the Social Media Advertising Model

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Pitfalls of the Social Media Advertising Model

Paul Romer, Nobel Prize-winning economist and Boston College Professor of Finance takes us through social media’s advertising model and the ethical …

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Reddit Shares Performance Data and Growth Strategy Ahead of Coming IPO

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Reddit Shares Performance Data and Growth Strategy Ahead of Coming IPO

Reddit’s IPO is almost here, with the company filing its S-1 registration with the SEC today, which outlines its current finances and strategic goals, ahead of the pending listing.

And there are some interesting notes in the data provided.

First off, Reddit, which will soon be listed on the New York Stock Exchange under the symbol “RDDT”, claims that it has over 73 million daily active users, and 500 million monthly visitors.

Which is a highly unusual split of daily to monthly active usage.

In general, most social platforms see a 1:1.8 ratio of daily/monthly users, with some variance. Facebook, for example, has 2.11b DAU and 3.07b MAU (x1.45), while Snapchat has 414m DAU/800m MAU (x1.9).

Reddit claims to have a variation of x6.8 DAU to MAU, which is way out of proportion for those averages.

Could that be correct? Could Reddit be seeing a heap more visitors who don’t come back to the site daily?

I mean, I guess, when you factor in people who might be using Reddit to supplement their Google searches, so may visit infrequently. But it’s not exactly a great endorsement of the magnetism of its product if the vast majority of people who look at the app are not interested in coming back regularly.

Reddit reported reaching 430 million monthly actives back in 2019, then switched to sharing daily active user counts from 2020 onwards (it had 52m DAU then). My assumption was that Reddit made this switch because it lost users as a result of changes to its rules, which led to the expulsion of thousands of its most controversial communities. But Reddit’s data here suggests that it hasn’t necessarily lost ground, it just opted for an alternative reporting method. Though it does seem odd.

The documentation also provides a narrative overview of the platform, which it refers to as “a digital city.”

As per Reddit’s S-1:

Reddit is a global, digital city where anyone in the world can join a community to learn from one another, engage in authentic conversations, explore passions, research new hobbies, exchange goods and services, create new communities and experiences, share a few laughs, and find belonging. People are diverse and have multiple interests. Just like in a city, where citizens are part of multiple subcommunities, on Reddit, users often belong to multiple communities.”

“Exchange goods and services?” Not sure what that refers to exactly, but…

Reddit also refers to its “constantly evolving human archive of information”, which it recently sold to Google for $60 million per year.

Which is also interesting when you consider this listing:

Reddit IPO

OpenAI CEO Sam Altman owns 8.7% of the current Reddit shares, which gives him significant sway in the company’s decisions, and it’d be interesting to know what Altman thinks about Reddit selling its user data to Google for use in its competing AI applications.

Presumably he’s okay with it. Which seems unusual in itself.

On specific subreddit usage, Reddit says that:

  • Over 500 subreddits have at least a million subscribers
  • The average active minutes for logged-in users on Reddit is around 20 minutes per day, though that increases to over 35 minutes a day for those who’ve been active on the platform for over five years, and up to 45 minutes a day for those who’ve been active for over seven years.
  • 85% of Redditors say that the platform is “where they learn about the topics they love the most”, while 83% say that conversations on Reddit are more on-topic than any other social media platform

In terms of revenue, Reddit says that it generated $804 million in revenue in 2023, an increase of 21% year-over-year.

Reddit believes that it has significant opportunity to increase its intake in the coming years, particularly due to its current revenue split, which shows that it’s heavily reliant on US users.

Here’s Reddit’s current Average Revenue Per User charts:

Reddit IPO

Reddit’s audience is split almost 50/50 between the U.S. and everywhere else, and as Reddit expands its ad business, that should facilitate more monetization opportunities in other regions.

Reddit also says that it’s exploring new technological developments to enable more ways for customers to invest to grow their business.

Then there’s the Google data-sharing deal:

“We are also in the early stages of monetizing our emerging opportunity in data licensing by allowing third parties to access, search, and analyze data on our platform. In January 2024, we entered into certain data licensing arrangements with an aggregate contract value of $203.0 million and terms ranging from two to three years. We expect a minimum of $66.4 million of revenue to be recognized during the year ending December 31, 2024.”

So Reddit does have some additional avenues of monetization, and it’ll be interesting to see how the Google partnership plays out, and whether that helps to expand Reddit’s exposure and traffic as a result.

Reddit hasn’t provided an overview of the number of shares that it’s looking to offer at this stage, though it has included a plan to offer shares to its power users within its S-1 listing:

We will invite users and moderators to participate in the directed share program in six phased priority tiers. We will assign each eligible participant to a tier based on that participant’s contributions to Reddit. User contributions will be measured in karma (a user’s reputation score that reflects their community contributions). Moderator contributions will be measured by membership and moderator actions on our platform. Tier 1 will include certain users and moderators identified by us who have meaningfully contributed to Reddit community programs. Tier 2 will include users who hold at least 200,000 karma and moderators who have performed at least 5,000 moderator actions. Tier 3 will include users who hold at least 100,000 karma and moderators who have performed at least 2,500 moderator actions. Tier 4 will include users who hold at least 50,000 karma and moderators who have performed at least 1,000 moderator actions. Tier 5 will include users who hold at least 25,000 karma and moderators who have performed at least 500 moderator actions. Tier 6 will include all other eligible users and moderators.

That’s an interesting approach to get more user buy-in, and for a platform that is still reliant on volunteer labor for its moderation and management, that could be a critical assurance move.

Reddit does note that it’s seeking a $5 billion market capitalization valuation, dependent on various factors, with more details to come closer to the listing.

Which is a high price tag for an app with questionable value, but it’s not beyond the realm of possibility, and it could be where Reddit ends up when the next stage is announced.

Reddit’s initial public offering be launched after the SEC completes its review process, which is now well in motion, and set for next month.

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Florida lawmakers push to ban social media for children under 16

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Vietnam plans to ask all social media users on platforms such as Facebook and YouTube to verify their identities

Social media. — © AFP/File Olivier DOULIERY

Florida moved Thursday towards enacting what would be one of the strictest bans on children’s use of social media in the United States after the state Senate passed a bill to keep those under 16 off such platforms.

The controversial bill seeks to protect children’s mental health against the “addictive features” of such platforms, amid fears over online dangers including from sexual predators, cyber bullying and teen suicide.

The legislation, which was approved 23-14, will now go back to the state House. It has already passed there, with the House speaker championing the legislation, but changes made in the Senate need to be approved in the lower chamber.

Florida Governor Ron DeSantis has expressed concerns over whether banning social media for children under the age of 16 violates parents’ rights – Copyright AFP Philip FONG

It would then have to be signed by Republican Governor Ron DeSantis, who has expressed skepticism about the legislation. Similar efforts by other states have previously been blocked by courts.

“We’re talking about businesses that are using addictive features to engage in mass manipulation of our children to cause them harm,” the bill’s sponsor, Republican Erin Grall, told the Florida Senate on Thursday.

But DeSantis, who has previously said he is sympathetic to fears over the impact of social media on children, voiced concerns about parental rights.

“A parent has the right to opt in,” he told a press conference Thursday.

The governor has argued many times that parents should have more control over decisions affecting their children, particularly in education.

Under DeSantis Florida has passed laws to curtail teaching about sex education and gender identity in schools and to eradicate diversity programs in state-funded universities.

Scores of books have been removed from the state’s school library shelves in recent months, deemed inappropriate for children by conservative parents and school boards.

Some critics say such a law targeting social media use would violate the First Amendment of the US Constitution, which guarantees freedom of speech.

Last year a federal judge blocked an Arkansas initiative that sought to require parental consent to open a social media account.

Most social media networks already have a minimum age of 13 to open an account, though they do little to ensure compliance with the provision.

If the regulation is approved, the platforms will have to block children under the age of 16 from creating accounts and close those already opened.

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