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I am actually curious how Musk is going to pull this off. Twitter is actually in a way worse financial situation than it was two weeks ago due to the massive am

I am actually curious how Musk is going to pull this off. Twitter is actually in a way worse financial situation than it was two weeks ago due to the massive amount of debt incurred in the buyout process (and the associated payments). Layoffs are a must and cutting infrastructure costs is also crucial, however it's critical that twitter starts generating some serious revenue. Some advertisers have paused buying, and the $8 blue check thing could help a little but there is major ground to make up and I don't know how it get's done in the short term. I'll be getting some popcorn, but I am rooting for Musk to figure this one out.

jerf 4y ago
Twitter's revenue in 2021 was $5 billion [1], with a claimed 217 active user count. That's $25/user/year. $8/month -> $96/year, so each new subscriber is immediately worth about four subscribers under the old plan, plus that plan doesn't cancel all ads. If they can cut costs and give people reasons to subscribe, it might work, but if I were the investor being pitched I would certainly have very pointy questions about their conversion rate. Personally I'd amp it to a straight $9.99 and cut all the ads for a subscriber, and the primary focus of my engineering over the next year would be trying to figure out how to incentivize subscriptions, preferably with new useful things not locking away too many existing features behind walls. Still, I'd love to see one of these social networks succeed on a model where their users pay them money, instead of their subscribers. The incentives are just too perverse when the money comes from ads. [1]: https://www.prnewswire.com/news-releases/twitter-announces-fourth-quarter-and-fiscal-year-2021-results-301479494.html https://www.prnewswire.com/news-releases/twitter-announces-f...
- Ancapistani 4y ago
  > so each new subscriber is immediately worth about four subscribers under the old plan To think about it another way: if 25% of active Twitter users subscribe to the plan at $8/mo, they'll double their revenue. My gut says that that's way optimistic, and a more reasonable expectation is 5-10% conversion. Even if you assume 5% conversion, that's a 20% increase in revenue coupled with a ~50% reduction in labor costs.
  - sangnoir 4y ago
    > if 25% of active Twitter users subscribe to the plan at $8/mo, they'll double their revenue. I doubt 25% of active users average > 1 tweet per month. Twitter follows power laws. My guestimate is on any given day, <10% author a tweet, <20% comment. The rest of the actives just read, like and retweet. The latter groups have little to benefit from subscribing
    - Ancapistani 4y ago
      I agree, which is why I went on to say that I think 5% is a more realistic target. I also wouldn't discount the idea that some people are going to subscribe for political reasons, at least initially. HN seems to fairly consistently label Musk lately as "right -wing", but in truth he's become more of an "anti-left-wing" figure. By extension, I think that means that ~50% of the country is going to have a positive impression of his control of Twitter. I've been watching right wing social media (forums, not Gab/Truth/MeWe/etc.), and they're relishing in the layoffs. That effect won't last long, but it'll likely have a measurable impact on subscriptions and a corresponding long tail.
  - koonsolo 4y ago
    5 to 10% sounds way too high for me. To validate, I did a quick google search to see how YouTube premium converts, and it seems at 2.5%, which seems realistic to me.
    - Ancapistani 4y ago
      That's fair. Do we know yet what will be included in the Twitter plan? All I've heard is that it includes "verification", but that in and of itself doesn't strike me as sufficient to drive adoption.
      - koonsolo 4y ago
        I think half of the ads and more exposure of your tweets.
- vasco 4y ago
  Did everyone forget how app.net [0] who's claim to fame was "paid twitter" flopped spectacularly while not even being done during a major recession? Nobody is going to pay a monthly fee for a checkmark, I feel like I must be missing something because intelligent people are looking at this plan as if it's sensible while it sounds absolutely ludicrous to me. [0] https://techcrunch.com/2017/01/12/app-net-the-ambitious-project-to-build-a-better-twitter-is-finally-dead/ https://techcrunch.com/2017/01/12/app-net-the-ambitious-proj...
  - jerf 4y ago
    I feel like a lot of repliers missed my middle paragraph? Or maybe don't know what I mean by "very pointy questions about their conversion rate"? In the short and medium term there's no hope of covering their previous revenue with an $8/mo plan. Long term is murkier, because it includes questions about what other services they may provide for that. Cutting expenses and growing revenues is at least moving those two things in the right direction but it remains to be seen whether they can bridge the gap. Were we having this discussion in 2018 I'd now say something about how the market seems to be willing to let those gaps go, but here in late 2022 heading into 2023 that's a much harder argument to make. Then again, for the same reason, a case could be made that Twitter was in trouble regardless. Stock price was already on its way down. It is not clear that there is a solution, period. There is no guarantee that Twitter can exist, recognizable as what we currently think of as "Twitter", without investors willing to close their eyes and imagine what could be, rather than opening their eyes and seeing what is. There is no guarantee that social networks at scale can function on their real revenues, in an environment without effectively 0%-interest funny money. Especially if a recession also starts lowering the ad budgets of other companies. There are some significant diseconomies of scale as you try to scale up one centralized "community", and I remain not entirely convinced this is actually a viable market niche.
- croes 4y ago
  How many of these users are from countries where $8 is too much to afford? I doubt that 50% of the blue checks will pay, way less the ones without. And Twitter still needs to verify the blue checks otherwise it becomes useless.
- bagels 4y ago
  I know I'm a few days late, but, users that can pay $8/mo for twitter bring in more ad revenue per user than those that can't. Average ad revenue on social networks for US people is about 10x the worldwide average. This there are two confounding problems with paid Twitter: 1) If you let users that can afford the $8/mo pay to not see ads, you will lose more ad revenue than you gain in subscription fees. 2) The people that are bringing in less ad revenue than a subscription probably won't subscribe.
ryandvm 4y ago
Not me, I'm rooting for this guy to develop a little humility.
- LightG 4y ago
  ... via a swift kick from capitalism in the ghoolies ... "Fate loves irony"
- Railander 4y ago
  He's definitely feeling the pain right now, you can tell by how much more docile he's gotten in the last 48 hours.
sangnoir 4y ago
Aren't (fairly predictable) second-order effects a bummer?
esalman 4y ago
Federal subsidies? I guess it's a genuine question.
csours 4y ago
How much lifting can the check mark do? Twitter has 450 million users that log in at least once a month. 450,000,000 MDAU * $8 * 12 months = 43.2 Billion/year But they won't sell 450 M check marks. If we take that 100% down to 1% (4.5M), you're back down to $432 MM / year, which isn't enough to cover the interest payment. Are there even 4.5M who want a check mark? The current estimate is 420,000. That would be $40 MM / year. If you payed 10 people $200,000/year to support and develop features for the check mark, that would be $2 MM/year, and your profit would be down to $38 MM / year. Let's say that you had one low wage screener for every 10,000 check marks (to make sure they have a good time and don't see too much spam) That would be 42 employees, add another 3 for management (but they get paid more). The screeners cost $20,000 each because they're offshore, so that's $840,000. Add another $200,000 for their management and that's another million a year down the drain. If you want to run your own numbers, here's a sheet (make a copy): https://docs.google.com/spreadsheets/d/15WtfofzrEWE65nQH63_ZQAZB6p6oGpq19ufBlzYJ8bs/edit?usp=sharing https://docs.google.com/spreadsheets/d/15WtfofzrEWE65nQH63_Z...
mikewarot 4y ago
The best plan I've seen is this proposal[1] by Saagar Enjeti, in which Twitter is repurposed as the worlds best customer service hotline. Charge people with large follower base for their followers on a scaled basis... with a large free tier to help out those just up and coming. Get advertising completely out of the business model. [1] https://www.youtube.com/watch?v=zwOm4QOZN9k https://www.youtube.com/watch?v=zwOm4QOZN9k

jerf 4y ago

Twitter's revenue in 2021 was $5 billion [1], with a claimed 217 active user count. That's $25/user/year. $8/month -> $96/year, so each new subscriber is immediately worth about four subscribers under the old plan, plus that plan doesn't cancel all ads. If they can cut costs and give people reasons to subscribe, it might work, but if I were the investor being pitched I would certainly have very pointy questions about their conversion rate. Personally I'd amp it to a straight $9.99 and cut all the ads for a subscriber, and the primary focus of my engineering over the next year would be trying to figure out how to incentivize subscriptions, preferably with new useful things not locking away too many existing features behind walls. Still, I'd love to see one of these social networks succeed on a model where their users pay them money, instead of their subscribers. The incentives are just too perverse when the money comes from ads. [1]: https://www.prnewswire.com/news-releases/twitter-announces-fourth-quarter-and-fiscal-year-2021-results-301479494.html https://www.prnewswire.com/news-releases/twitter-announces-f...

Ancapistani 4y ago
> so each new subscriber is immediately worth about four subscribers under the old plan To think about it another way: if 25% of active Twitter users subscribe to the plan at $8/mo, they'll double their revenue. My gut says that that's way optimistic, and a more reasonable expectation is 5-10% conversion. Even if you assume 5% conversion, that's a 20% increase in revenue coupled with a ~50% reduction in labor costs.
- sangnoir 4y ago
  > if 25% of active Twitter users subscribe to the plan at $8/mo, they'll double their revenue. I doubt 25% of active users average > 1 tweet per month. Twitter follows power laws. My guestimate is on any given day, <10% author a tweet, <20% comment. The rest of the actives just read, like and retweet. The latter groups have little to benefit from subscribing
  - Ancapistani 4y ago
    I agree, which is why I went on to say that I think 5% is a more realistic target. I also wouldn't discount the idea that some people are going to subscribe for political reasons, at least initially. HN seems to fairly consistently label Musk lately as "right -wing", but in truth he's become more of an "anti-left-wing" figure. By extension, I think that means that ~50% of the country is going to have a positive impression of his control of Twitter. I've been watching right wing social media (forums, not Gab/Truth/MeWe/etc.), and they're relishing in the layoffs. That effect won't last long, but it'll likely have a measurable impact on subscriptions and a corresponding long tail.
- koonsolo 4y ago
  5 to 10% sounds way too high for me. To validate, I did a quick google search to see how YouTube premium converts, and it seems at 2.5%, which seems realistic to me.
  - Ancapistani 4y ago
    That's fair. Do we know yet what will be included in the Twitter plan? All I've heard is that it includes "verification", but that in and of itself doesn't strike me as sufficient to drive adoption.
    - koonsolo 4y ago
      I think half of the ads and more exposure of your tweets.
vasco 4y ago
Did everyone forget how app.net [0] who's claim to fame was "paid twitter" flopped spectacularly while not even being done during a major recession? Nobody is going to pay a monthly fee for a checkmark, I feel like I must be missing something because intelligent people are looking at this plan as if it's sensible while it sounds absolutely ludicrous to me. [0] https://techcrunch.com/2017/01/12/app-net-the-ambitious-project-to-build-a-better-twitter-is-finally-dead/ https://techcrunch.com/2017/01/12/app-net-the-ambitious-proj...
- jerf 4y ago
  I feel like a lot of repliers missed my middle paragraph? Or maybe don't know what I mean by "very pointy questions about their conversion rate"? In the short and medium term there's no hope of covering their previous revenue with an $8/mo plan. Long term is murkier, because it includes questions about what other services they may provide for that. Cutting expenses and growing revenues is at least moving those two things in the right direction but it remains to be seen whether they can bridge the gap. Were we having this discussion in 2018 I'd now say something about how the market seems to be willing to let those gaps go, but here in late 2022 heading into 2023 that's a much harder argument to make. Then again, for the same reason, a case could be made that Twitter was in trouble regardless. Stock price was already on its way down. It is not clear that there is a solution, period. There is no guarantee that Twitter can exist, recognizable as what we currently think of as "Twitter", without investors willing to close their eyes and imagine what could be, rather than opening their eyes and seeing what is. There is no guarantee that social networks at scale can function on their real revenues, in an environment without effectively 0%-interest funny money. Especially if a recession also starts lowering the ad budgets of other companies. There are some significant diseconomies of scale as you try to scale up one centralized "community", and I remain not entirely convinced this is actually a viable market niche.
croes 4y ago
How many of these users are from countries where $8 is too much to afford? I doubt that 50% of the blue checks will pay, way less the ones without. And Twitter still needs to verify the blue checks otherwise it becomes useless.
bagels 4y ago
I know I'm a few days late, but, users that can pay $8/mo for twitter bring in more ad revenue per user than those that can't. Average ad revenue on social networks for US people is about 10x the worldwide average. This there are two confounding problems with paid Twitter: 1) If you let users that can afford the $8/mo pay to not see ads, you will lose more ad revenue than you gain in subscription fees. 2) The people that are bringing in less ad revenue than a subscription probably won't subscribe.

ryandvm 4y ago

Not me, I'm rooting for this guy to develop a little humility.

LightG 4y ago
... via a swift kick from capitalism in the ghoolies ... "Fate loves irony"
Railander 4y ago
He's definitely feeling the pain right now, you can tell by how much more docile he's gotten in the last 48 hours.

sangnoir 4y ago

Aren't (fairly predictable) second-order effects a bummer?

esalman 4y ago

Federal subsidies? I guess it's a genuine question.

csours 4y ago

How much lifting can the check mark do? Twitter has 450 million users that log in at least once a month. 450,000,000 MDAU * $8 * 12 months = 43.2 Billion/year But they won't sell 450 M check marks. If we take that 100% down to 1% (4.5M), you're back down to $432 MM / year, which isn't enough to cover the interest payment. Are there even 4.5M who want a check mark? The current estimate is 420,000. That would be $40 MM / year. If you payed 10 people $200,000/year to support and develop features for the check mark, that would be $2 MM/year, and your profit would be down to $38 MM / year. Let's say that you had one low wage screener for every 10,000 check marks (to make sure they have a good time and don't see too much spam) That would be 42 employees, add another 3 for management (but they get paid more). The screeners cost $20,000 each because they're offshore, so that's $840,000. Add another $200,000 for their management and that's another million a year down the drain. If you want to run your own numbers, here's a sheet (make a copy): https://docs.google.com/spreadsheets/d/15WtfofzrEWE65nQH63_ZQAZB6p6oGpq19ufBlzYJ8bs/edit?usp=sharing https://docs.google.com/spreadsheets/d/15WtfofzrEWE65nQH63_Z...

mikewarot 4y ago

The best plan I've seen is this proposal[1] by Saagar Enjeti, in which Twitter is repurposed as the worlds best customer service hotline. Charge people with large follower base for their followers on a scaled basis... with a large free tier to help out those just up and coming. Get advertising completely out of the business model. [1] https://www.youtube.com/watch?v=zwOm4QOZN9k https://www.youtube.com/watch?v=zwOm4QOZN9k