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Comment by JoshTriplett | Hacker News Reader

Trying to rework Twitter into a profitable company does not seem like an enviable position. How do folks see Twitter becoming sustainably profitable, without tactics that will alienate their userbase?

They've tried ads (promoted tweets), which doesn't seem to have worked well. They've tried analytics targeted at high-end users/companies, which doesn't seem to have much traction (though it does seem both useful and unobtrusive).

Paid accounts? What features would such an account have that free accounts wouldn't?

Longer tweets? That'll certainly change the culture drastically, but not necessarily for the better.

Richer content? Likewise.

Twitter seems like the contemporary company with the most valuable yet least profitable product.

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Twitter has annual revenue of $1.4 billion. You really can't figure out how to be profitable on that?

That seems to signal a lack of creativity. Twitter has nearly 4,000 employees—there is simply no way you need that many employees to run their core services.

Twitter has already done some layoffs, but they could stand to do plenty more. They really don't need more than 1,000 employees.

The company was built with the idea that it'd be the next Facebook but there doesn't seem to be any path to that happening. They need to accept their market position and optimize on profiting from it. Fortunately, unlike Facebook, their core user experience is much simpler and should require way fewer engineers.

There's only so much fat you can trim. Even if you managed to automate everything, fired everyone and just let Jack run it on his own, you're looking at a max of $1.5b profit/year. With no prospect for growth that $12B market cap is going to collapse very rapidly.

Right now they are trying to find other niches to fill so they can continue to grow, they are just not doing it very successfully.

> $1.5b profit/year

If they actually got to $1.5b annual earnings, they could definitely justify a $12b cap. A P/E of 8 would be ridiculously low for the technology industry—heck, for any industry.

I'm not enthusiastic about Twitter and certainly wouldn't buy the stock, but the company also definitely isn't "worthless." There's certainly a path to profitability.

> A P/E of 8 would be ridiculously low for the technology industry—heck, for any industry.

In this scenario they have fired everyone and given up trying to grow. A P/E of 8 would be way overvalued.

You would only have to pay out 360 million a year to shareholders on a market cap of 12B to get a 3% dividend yield. It may not be sexy, especially in Silicon Valley, but Twitter could be a perfectly viable company.

But that's the problem they have - the market is/was bought in on the basis that this is a $40bn company (or more), the price reflects an massive upside belief, but the reality is $12b is about right.

So - sack a lot of people, cut costs, hold cash in the business and disappoint investors... Will the investors wear that though?

> A P/E of 8 would be way overvalued.

I disagree. For one thing, a P/E of 8 is standard for industries which most think are either declining or entirely stable. Benjamin Graham used 8.5 as a "no-growth" P/E so it's hardly insane. [1]https://en.wikipedia.org/wiki/Benjamin_Graham_formula

Moreover, even without feature expansion, I do think Twitter will see growth, though that growth will be minimal. At the very least they stand to benefit from the ever-increasing number of people on the internet.

A P/E of 8, in today's interest rate environment, means the company is actually failing and you're buying a decreasing future stream of revenue. Out of the S&P 500, there are four companies with P/E below 8 (Delta, Noble Corp (oil rigs), Yahoo, and Valero (oil again)).

Keep in mind that a lot of their costs are rapidly declining as the stock price goes down. This is the piece of a GAAP earnings statement that doesn't make a lot of sense to me. If the market loves what they're doing, and the stock goes up, then what they were paying people suddenly becomes unreasonable, and they get hammered for not controlling costs? I just don't get it.

Anyway, I sold all the shares I could at $51, and then sold everything else at $31, so I clearly didn't feel like the price was worth that, but $12B for the company seems a little low to me. Given current news is likely to be taken as a reason to sell, it wouldn't surprise me at all to see the company get bought. Which I guess could push the stock up a little bit, like it did last week, but it would take months of that to get people's compensation back to where it was with RSUs that were handed out a year ago.

Investors compare earnings quality across all sectors. Very very few companies trade at 8x revenue. Tech companies typically get a premium because they usually are quasi monopolies (See MSFT at 4x EV/Rev) and have solid growth rates. If you're not adding users, it means your growth is in question; how do you then justify an 8x multiple?

For reference most run of the mill companies trade somewhere around 1x revenue.

Why would their costs go down rapidly; stock based comp? Typically stock based comp has a strike price lower than the current share price. So they save but maybe not as much as the stock price collapse might suggest. Also, they'd still be unprofitable. A lot of professional investors feel they should cut costs, focus on periscope, and start making money off the new organisations that make money off of having access to information now. Things like charging the times and the journal for a live feed from ground action in Syria.

Yes, stock-based comp (primarily in the form of RSUs, not ISOs) are a large part of their overall costs.

Professional investors should stick to investing, product management is clearly not their strong suit based on this laundry list of proposals. :)

No. There are basically 5 ways make more money as a company. Professional investors usually have a better handle on these than the companies themselves.

Time and time again, companies come up with supply driven theses that give birth to products that fail. Demand driven products succeed. Knowing when to engage in M&A, sell assets, cut costs, expand to new markets and engage in corporate actions requires judgement that few companies have. It's not always about iterating on the product you already have.

Facebook understands this which is why they have made several key acquisitions. They're looking to be the home of the best innovations in social media; whether it comes from internal sources or external teams.

In Twitter's case, they have hit the limit of mind share in most markets. Everyone knows about it; few on the margin have incentives to sign up. Periscope has potential if data costs come down.

Being able to enumerate a list of classes can be helpful for categorizing a set of actions into a framework, but it doesn't give you much insight into whether or not a particular action is likely to produce the effect you're looking for. In the specific case of Twitter, I think stopping product development on Twitter the product would be a losing strategy. Keep in mind Periscope has at least in part been successful because it can piggy-back on the Twitter network. That network is not a static asset, it must be invested in to continue to hold value.

Your assertions are based on? Intuition? Mine are backed by data from market studies. Twitter is a known quantity and those who haven't signed up don't because they don't have a need to. Social networks are valuable because of the type and quantity of people there. You can do many things to monetize that. Not much you can do when that number doesn't grow. Notice the stock has fallen despite revenue growth being spectacular.

This is why people in industry don't always make it as CEOs. Knowing which game to play is key. Thinking like an investor is key too. Don't take it from me; take it from Buffett.

As an investor, I've made north of $5M on Twitter stock. At this point I hold 0 -- because I believe MAUs are dead in the water. I believe they'll be acquired and become a footnote in history.

I think making tweets more readable would help a lot. I think pulling @ addresses, hashtags, and URLS out of the body would give every tweet more breathing room and make more sense to an everyday user.

Then I've read heaps of great ideas here on HN about how they should be leveraging the real-time stream to be the go to place for what is going on for any issue.

What I don't understand is why nothing is changing, I've only been a twitter user for a few years but I've never seen anything change. I think they need to be pumping out lots of little experimental tools for finding, consuming and creating tweets.

> they need to be pumping out lots of little experimental tools for finding, consuming and creating tweets

This existed as a thriving third-party ecosystem, before Twitter dismantled it, http://www.mathewingram.com/work/2015/04/30/twitters-multi-b...

"Last year, Twitter effectively admitted that it needed third-party developers ... For anyone who had worked with Twitter in the past, however, this was a little bit like Fox Inc. asking for chicken volunteers to help it build a new hen-house. As far as I can tell, there’s little or no evidence that Twitter’s outreach program is working. What would Twitter be like today if it had embraced its ecosystem and tried to build on it instead of cutting it off at the knees? ... I think it would have a lot more goodwill to spend — both with developers and with users — than it does now, and I think many aspects of the service that it is now trying to build up, including smart recommendations and curation, would be a lot better off with outside input than they are now."

Fully agree, but I think they they could at least have some in house talent pumping out experiments.

Would be a dream job for me to be on twitters payroll building experiments and functional prototypes.

What I have a hard time with is consuming conversations esp. when there are multiple branches. There is no easy overall thread view.

Agreed; while the current time-ordered view works OK for some purposes, a quick toggle to threaded conversations would help massively when reading a large set of replies.

Then go back to the stream and find yourself at the top of the page. Have fun scrolling down to where you were. I get it, pagination is totally 1999. But isn't there some JavaScript solution to this?

Well, Plurk had something like that but still was not that great of a UX.

Also scrolling down is not really infinite: on my system it's around 700 tweets (calculated by Ctrl-F "reply").

It's 800 tweets (per https://dev.twitter.com/rest/reference/get/statuses/home_tim...), and it sucks if you're one of those who want to read every single tweet posted while sleeping.

Twitter would be profitable in the tens of millions per quarter range except for stock-based compensation:

http://files.shareholder.com/downloads/AMDA-2F526X/840118979...

I'm inclined to say the best thing they could do would be scaling down expectations of bubble-level returns and focusing on value rather than screwing with the core service trying for unrealistic returns. The problem is that this would require compensating executives less and we live in a era obsessed with short-term returns.

More like 100s of millions of dollars per quarter. They are actually a healthy company with good positive cash flow if not for stock based comp.

I think they have a ton of opportunity with a distribution platform like that. Tweets are already headlines for other products.

A few expansion areas come to mind off hand:

1. Media distribution

2. E-commerce (get the hottest, limited supply thing)

3. Events & ticketing

4. Financial market alerts

5. AMA-style Q & As

6. Chat/AI services and integrations

> 5. AMA-style Q & As > 6. Chat/AI services and integrations

This actually makes me wonder: if you increase or remove the length limits, how well would Twitter work as a private chat platform?

Because compared to the terrible internal "social platform" sites that some large companies run on their intranets, a company-wide private version of Twitter actually seems like a significant improvement. Use lists (including shared lists) as an equivalent to rooms or groups. That would give three different types of streams: your main feed (people you follow from across the company), the groups you watch or participate in (where most of the productive value comes from), and the firehose (to sample what's going on across the whole company).

As a bonus, if you add in a form of federated accounts, this could allow businesses paying for such a service to have a family of verified accounts on the public Twitter, all tied to their domain (similar to email addresses).

Slack?

In a way, yes. But far more people know Twitter, including employees and purchase-decision-makers.

Imagine "Enterprise Twitter", something like Yammer and Slack. I use Yammer at work and it is worse than Twitter in every way, except it has no post length limits and you can create groups. Without the annoyance of spammers, Enterprise Twitter could implement new features like following #hashtags. Twitter needs to fix their threading UI, though.

Facebook has a "Facebook at Work" enterprise product and, from what I hear, the company dogfoods its own platform for work as an alternative to email and mailing lists.

This is basically how Yammer was introduced, as "Twitter for the enterprise". I think the Slack model makes a lot more sense in most work contexts, though Yammer may be an okay addition in a big enough company.

The idea may not be too far-fetched as Facebook actually does have an enterprise product, Facebook At Work. I think Twitter is too focused on other things to try it though.

RE 2. Yea, wait... What ever happened to the e-commerce platform they started to roll out?

> 6. Chat/AI services and integrations

6b. "Customer support in a box" services for companies that use Twitter to find and help customers with problems.

7. Micropayments: Twitter could monetize Likes using a Flattr-like micropayment system. Just add a "tip" button next to the heart button, to pay the tweet author $0.01. It could create a virtuous cycle of more tweets, more tweeters, and more idle funds in tip accounts for Twitter to reinvest elsewhere.

It's totally possible... if they accept that they're a media company and therefore don't need to employ 2,000+ technical people.

A slightly different UI for digesting the firehose. With ads embedded directly into your twitter stream, it's so easy to just gloss over ads. Hell, it's so easy to skip past quality tweets as well since there is just so much coming through. I'm not sure what this new interface should be, just that there needs to be a different way to sift through tweets.

One possibility may be to give users the option to sift through their feed in different ways. I know it's a novel concept in SV, but...

I doubt they need to increase revenue. They have billions. What they need to do is reduce costs. I have no idea what they look like internally, but I have never seen a company of their size that cannot be streamlined.

> Longer tweets? That'll certainly change the culture drastically, but not necessarily for the better.

Charging for longer tweets (either a flat amount or per char over 140) may be a good source of additional revenue. The majority of "normal" users wouldn't take advantage it, but many businesses probably would.

This would have the advantage of removing the char limit when people want to (enough to pay for it) but without drastically changing the culture since the majority of tweets would presumably still be under 140.

People who'd use it just post a screenshot of typed text >140 chars.

Something obvious: offer an easy way to pay (even $ 5) for increasing their API limits. Google did it with AdWords while Yahoo required you to pay many thousands upfront.

I'm of the camp that it's just not possible. Given their demographic and model, I don't see how this company ever makes enough money to justify any valuation.

It's an electronic wasteland and not the kind that makes money. I don't see how that ever changes.

Charge people with followers. $10 per month if you have > 10K followers, $100 for > 100K followers, and so on. You charge as you are allowing them to broadcast

I have zero data to back this up, but I would say that this will damage you more than help.

If even a smallish percentage of key athletes/celebs/whatevers move exclusively to Instagram or something else, it would seriously disrupt Twitter. IG would love that, in fact.

Plus, how many people with over 10k actual followers are there really? Is $120/year times that number really going to make a difference for the business? Seems cheap and risky simultaneously.

It will be interesting to pull out some numbers here to see how the model looks. Is there a way to find out how many people have more than 10k followers? Politicians and celebs are getting access to their fans and followers. I think that kind of access should not be free especially when celebs are promoting their apps, music, etc.

Well, that might deal with "buying followers". But my personal pet idea for paying for twitter would be something like reddit gold: a slight premium tier, but not necessarily paid for by the account holder. Encourage people to pay for the accounts of people they like. Heck, provide a "micro" donation system alongside it (although this runs into problems, Twitch passim)

Also, a lot of people would like a better anti-abuse system and some might be prepared to pay for it.

> any valuation

Really? You actually think Twitter has negative value as a company?

They have real revenue. Fire everyone except a few dozen employees to maintain the core services/ads. That'll let you collect at least $100 million in profit.

At a valuation of <$1 billion, Twitter would be a bargain.

Good point, I used the wrong word there. Meant any valuation remotely near where they are. $12B? LOL no way. $1B, sure.

I agree with your plan and would likely run the company like that -- except "just maintaining" a social network sounds like a long-term recipe for disaster too.

The share price would also tank with that plan, which of course won't fly being a public corporation. This is why they're in such a rough place.

Twitter is actually cash flow positive. The main reason they show an GAAP loss is because of stock based comp. Take that out of the equation and they are cash flow positive and pretty profitable.

I've always said / thought the same, but they're still around. I know some people on the ad sales team, and I know how hard they work. They might be struggling and not thriving, but they're not out just yet.

I'm surprised with the amount of gloom around Twitter, as I feel like there are some fairly obvious ways they can improve the core product, and with the recent management overhauls, a distinct chance it will happen.

Would these future innovations alienate their userbase? Well do we have evidence they alienated the userbase previously. I doubt it.

While we can point to scores of #ragetweets about how Twitter is finished, finished, because they have replaced hearts with favorites, those complaints last about 2 days. Another example would be how embedded images would destroy Twitter (people said the same when Mosaic introduced images to the web in around 1994, as far as they were concerned, the internet had jumped the shark).

The fact is, Twitter has managed to slowly add features like hashtags and images without changing the essence of the product, engaged users will stick around if they keep doing so. I'd acknowledge that the one last negative sentiment was one close to HN's heart - the developer/API issues - and they still have to iron that out (so far, @Jack's #HelloWorld initiative from three months ago hasn't yielded). But I'm thinking more about features they can add to the core product.

Fairly obvious, and I think impactful, innovations we will see are:

* Long-form tweets - The 140 limit is confusing to Twitter newcomers. Meanwhile, Medium shows the power of a clean publishing platform where anyone can say something important without having to setup a blog and feel the obligation to keep posting. It helps them find an audience. Twitter has a giant ready population of people with interesting things to say and many of them are already using Twitter to say it, in less than ideal ways (too-long Tweetstorms, screenshots, linking to pastebins and 3rd party long tweet services). Designed right, I think they can introduce this with minimal impact on the normal experience and suddenly become a giant source of substantial content.

* Video - Similar argument to long-form tweets. They have a ready population of potential video makers and can easily find videos an audience. I imagine a lot of people discover YouTube videos from Twitter now; those could be directly served by Twitter in the future.

* Curation - Twitter's model of showing every tweet from every friend is archaic and doesn't serve the needs of most users. If I haven't logged in for 2 days, do I really need to see a blast of trivial tweets from 5 minutes ago? They have made some attempts to improve this (e.g. "While you were away" highlights, which so far are mediocre), but can do a lot more, e.g. showing most relevant/popular tweets from friends (see: Nuzzel) and going beyond just friends' tweets/retweets if something is relevant enough. I know moving to a Facebook-like filtered stream will enrage some hardcore users, so they would need to do so carefully and maybe with settings to keep it the old way, etc. ... but I think it will be a big quality boost for most users and also make native ads more effective.

* Apps - The official apps aren't exactly loved and lack consistency (e.g. Tweetdeck and several other official apps still can't render polls, an important mainline feature for a while now). A savvy product team could improve these across the board.

There are a lot more possibilities, and those are just features related to the core product, leaving aside monetisation opportunities such as buy buttons. Twitter has already moved in some of these directions and the signs are @Jack is intent on accelerating that effort.

I don't think killing of your own product and copying facebook can work. They would probably loose almost all their users in days like "digg".

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