How should Twitter make money?

I’m not arrogant enough to believe I can actually solve Twitter in under an hour, but let’s walk through the product and see if we gain any clarity.

Twitter is a microblogging site. Users get value from 1) access to content produced by others, 2) the ability to produce original content and place it in front of others, and 3) the ability to act as the middle-man, sharing content produced by others. It’s principal advantage in the marketplace is that it has already achieved a critical mass of users, such that content placed on Twitter has more value than content placed on competitor sites. It’s biggest disadvantage is no one is sure how to optimally generate revenue from their user base.

For a moment’s perspective, Twitter can comfortably be expected to earn $4 billion /year in advertising revenue if it just held steady, which isn’t peanuts. The problem is that it hasn’t been enough to turn a steady profit and it’s definitely not enough since Musk spent $43 billion for Twitter. I won’t pretend to understand his utlity function, but I’m pretty sure he’s not hoping to just (nominally) break even on his deathbed. He at least wants to break even in terms of net present value.

How can Twitter make money? As best I can tell, there are only three possible revenue strategies. It can charge user fees. It can sell advertising. It can sell the data it accumulates. That’s it.

Let’s get the first one out of the way. User fees can be charged in two dimension, tall or wide. Tall fees focus on charging a large fee from a small number of high value accounts. Brand accounts, like Coca-cola or Beyonce. Wide fees focus on collecting a small fee from a large number of lower value accounts (<100k followers). Musk wants to charge for user verification, which is a fairly wide tactic. There is nothing inherently right about wide or tall user fee strategies. The problem with charging for verification is that it lowers the quality of information discourse on Twitter. Reducing the quality of the product diminishes the value of advertising and generated data while also lowering the bar for competing products (NB: competing products aren’t necessarily or even likely to be other microblogging sites. Just whatever else might substitute e.g. TikTok, Instagram, Substacks, high fidelity smoke signals from vaping, whatever).

Advertising and user data go hand in hand. One could speculate that the reason Twitter’s advertising revenue underperforms relative to their position in the market is either because a) Twitter is a bad channel to advertise within, b) the manner within which users engage the produce yields low quality consumer data, and c) Twitter is bad at collecting and producing advertising opportunities based on that data. My guess is all three.

Is there a way to generate revenue while protecting or increasing the value of the product and data generated? Glad you never asked.

  1. Focus on charging fees from users who need Twitter and not from users that Twitter needs. Good rule of thumb: if they’re a person, Twitter needs them. If they are not a person, they need Twitter. Don’t charge $8 to verify a sportscaster from Tuscaloosa. Charge $0.01 per follower for each a corporate entity or brand. Charge them $1 per reply, $2 per retweet. Bundle user fees with engagement. When you’re selling printers to Chase Bank you don’t make money off the printers, you make it off the ink.
  2. Verify everyone with more than 10k followers. It incentivizes users to pursue more followers.
  3. Kill the bots. Just require monthly captcha, randomizing day and mechanism. The numbers you’ll lose on your sales pitch to advertisers will be more than made up for in increased quality.
  4. Allow for parallel content streams within users. Twitter advertising isn’t making enough money because they don’t know what to advertise to me. To be fair, nobody really knows how to advertise to me. Except Instagram. They have a window straight into my consumer id. Why? Because I take photos of things I love, write captions that betray my sense of humor, and scroll content that entertains me. They have a dossier on how to sell me crap and it works. Maybe I hate it, but I’ve also bought more from Instagram ads in the last year than I’ve bought from Gmail ads in 20 years.

Let’s talk about this last one a bit. If Twitter wants to learn more about me, they need to give me more opportunities to produce data, such as:

  1. Multiple feeds from subsets of the accounts I follow. Better yet, suggest alternate feeds. If I say yes to the 100 accounts you suggested as a starter, you’ve added a dimension to your data’s model of me.
  2. Multiple streams from which I produce content. I’m pretty sure a lot of my followers would love to subscribe to just me talking about economics or just about sports. Let me click a button on each tweet that says A stream, B stream, C stream, or ALL. Now Twitter is learning about me and each of the followers that makes a decision about which stream(s) they want to follow.
  3. Separate streams/feeds for photos. Steal a little Instagram market share.
  4. Separate feeds/streams for meso-blogging (10,000 characters). Steal a little from Substack. Charge $2 a month to produce meso-blog posts.

One last thing. Stop forcing content into feeds. Yes, people will pay to promote their content, but forcing it into my feed reduces the quality of the product. It’s like an informercial without the warning and bad sweaters. You have to at least color code it differently. Good advertising can dilute the product, but it can never degrade it. Forcing crazy people and grifters into my feed pushes users away, reducing trust and engagement. Just don’t.

There, I fixed Twitter. You’re welcome?

2 thoughts on “How should Twitter make money?

  1. StickerShockTrooper May 4, 2023 / 10:47 am

    What about charging for cosmetics, which seems to be the main funding source for a lot of young’uns’ social media these days (Discord, Reddit etc.)

    Hoping this article gets read by Twitter’s better replacement.


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