Can Twitter become a direct response advertising behemoth?

Last week, Jack Dorsey, Twitter’s co-founder, announced that he is stepping down from the CEO role at the company. In an email to employees, Dorsey revealed that he would only remain on Twitter’s board through May as the company’s CTO, Parag Agrawal, transitions into the CEO position. Agrawal occupies a prominent role in the development of Bluesky, Twitter’s decentralized social networking protocol effort; some see Agrawal’s appointment as a signal that the company will redouble its efforts around decentralization and blockchain-based product development.

Dorsey seems to be fully bought into cryptocurrency and, almost immediately after announcing his resignation from Twitter, declared that Square — the financial services company for which Dorsey also served as CEO, and which he’ll be henceforth focusing all of his attention as an executive — would rename itself to Block. While Dorsey had been under pressure from activist investor Elliot Management to resign as CEO of Twitter for two years, he likely had the latitude during that time to press further into cryptocurrency projects had he thought them viable. The fact that Twitter had made little progress with any products or features related to cryptocurrencies, blockchain, or web3 intimates that Dorsey saw little potential there for Twitter as a platform (aside from being, arguably, the epicenter of mainstream cryptocurrency / web3 discourse).

Another thorny problem that Twitter must solve — and which potentially motivated Dorsey’s resignation — is that of community safety, censorship, free speech preservation, and misinformation / disinformation. Under Dorsey’s leadership, Twitter had made a number of controversial decisions in this arena, including the banning of political advertising (which I consider an abdication of responsibility) and the total eradication from the platform, during the 2020 US presidential election cycle, of a link to a story related to Hunter Biden, Joe Biden’s son.

Neither of these conceptual perceptions — a blockchain-powered social networking API or the future of free speech — seems conseuqential as a pain point that must be solved by Twitter at this moment in time. Yes, perhaps blockchain might be the backbone of some future social media ecosystem; but it isn’t currently. Likewise, any discussion about the boundaries placed around speech on social media is mostly driven and kept alive by a cottage industry of media company consultants as well as the platforms themselves. One day after Jack Dorsey announced his resignation, Twitter’s new CEO, Agrawal, determined that the company would prohibit users from sharing photos of people without permission. From a distance, this decree appears to be a disastrous paean sung in service of a very specific worldview held by some reasonable proportion of Twitter employees. The dreary quagmire of speech regulation on social media is a tedious forever war that can’t be won, and, critically, it’s not the most important issue on which Twitter’s new CEO should be focused.

Cryptocurrencies and perfect speech bubbles are ideals that are constructed, popularly, to be pursued, not achieved in the near term. More immediately, Twitter has two very pedestrian, very coarse problems that it must solve: growth and monetization.

The most pressing question for Twitter’s new CEO, to my mind, is whether the company can create a direct response advertising behemoth that can rival other large platforms like Facebook and Google. I asked a similar question in 2016 in Thoughts on Twitter’s growth problems and suggestions for fixing them: why hasn’t the company focused more development time on fixing its leaky onboarding funnel and then monetizing the users that do retain? Twitter’s growth on the basis of revenue and DAU is anemic: in the one year from Q3 2020, Twitter’s “monetizable DAU” (mDAU) grew by only 1MM users in the US, from 36MM to 37MM, and globally the metric grew from 187MM to 211MM (12%). Snap, by contrast, saw its DAU grow by 23% in the same period. Yes, these metrics can’t be compared — but that’s the point. Twitter stopped reporting DAU as a metric in its quarterly reporting because the number had stagnated so conspicuously.

Twitter’s new CEO made a mistake in aggravating the fairly relaxed free speech position Twitter had occupied. Twitter, unlike Facebook, has not been shaken by scandals involving former employees. Twitter’s new CEO could have put initiatives like monetization and retention at the forefront of the company’s priority slate, but he instead chose to thrust his influence at topics that are interminably ablaze.

Growth and monetization, to my mind, are the most decisive metrics that Twitter’s management team must improve. Twitter’s sluggish growth can be seen in its quarterly reporting, but the digital advertising landscape has certainly changed over the course of 2021 with the introduction of Apple’s App Tracking Transparency (ATT) privacy policy. The new privacy landscape instituted by ATT created a disparity of outcomes for ad platforms: some platforms, like Facebook, are impaired meaningfully by the new privacy controls instituted by ATT. And other platforms, like Twitter, aren’t. I describe the dynamics behind this disparity in this article.

Twitter revealed at an analyst event in 2020 that 85% of its revenue is generated from brand advertising. Any growth model for the company requires that this number decreases: that direct response marketing owns a much more meaningful share of the company’s revenue stream. But what is needed for that to happen? Twitter’s O&O advertising platform is currently something of a chaotic, anachronistic system, and the company sold the ad tech asset, MoPub, that best captured direct response ad spend on mobile. If Twitter sees advertising revenue, but especially mobile advertising revenue, as an integral component of the company’s growth, then it should devote whole teams to advertising attribution and measurement. Nothing else should really matter to the company: growing direct response marketing revenue should be Twitter’s first and most critical aspiration.