Meh, Twitter and Reddit monetize just fine with ads. The problem comes in with VC expectations where everything must 1000x or die. These are not bad businesses, they're just small compared to Facebook or Google. What's needed is mature leadership that recognizes the value comes from the community, and following the private equity playbook of strip-mining the value is short-sighted.
Thing is, Twitter was profitable in 2019. Then the venture capitalists decided "Now is the time to increase your workforce by a factor of two. You need to start losing money again or you aren't trying hard enough!"
At the beginning of COVID there was a sense that WFH might be a permanent change and that companies might need to start competing on a lot of social distancing features. Look at Clubhouse exploding then, etc. Doubling the size of your workforce (and knowing you can shrink it if you are wrong) is a pretty reasonable bet. It has a known cost (measured in the hundreds of millions to few billions) if you try it and it is unnecessary (which it turned out to be), but a possible "death of the company" result if all the talent is gone just as you need XYZ to be competitive in a new landscape.
You can’t just shrink it. That’s the problem. They still think of it as a factory where everyone is just a robot.
Most places lack enough documentation and processes that shrinking the teams reduce knowledge. There is never an even distribution of skill sets etc. You kill off team dynamics. It’s not the same.
You can’t just slot people in and out without impact in software.
You can shrink it if you plan correctly from the hiring phase. If you hire new people for a new division, and then shutter that division, you minimize the consequences. If you hire a bunch of new low level people for a bunch of teams and then prune those same people out, it's tough but doable.
Heck, if you hire people because you might need them, give them nothing to do (as many people claimed happened to them) and then fire them it is the easiest of all.
If, on the other hand, you hire 100% more people, then fire 50% of the people and try to use that culling to get rid of a lot of older (and more expensive) employees, you can doom your company.
> You can shrink it if you plan correctly from the hiring phase. If you hire new people for a new division, and then shutter that division, you minimize the consequences.
You've just rephrased the exact issue I had differently. It doesn't matter if it's a new division or not unless your organization doesn't interact.
People have to go via onboarding and other steps. It involves HR "people and culture", the internal IT teams, the reception, you might get assigned a mentor, etc. These interactions spread when people socialize.
It's also as people and possibly shareholders how you view the company. Watch any sports and a player in form in the right team can perform 10x better. These so-called minimal disruptions actually have an impact.
Meta was paying a higher salary because less people wanted to work there. I don't see all the negatives as "minimal consequences".
Just to add, you can't increase it that fast either.
If you double the number of employees of some place in a year, you have a really large risk of completely redefining its entire culture. And a software business has basically 2 things, a culture and locked-in people.
> To play devils advocate does Twitter not seem fine now?
Fine in what sense? There's less features, less capacity and more outages. They couldn't even hold someone's presidential announcement fine without it breaking. Is that fine?
As a business they've gained debt and lost a lot of income. Is that fine? With less income, less ads and less of everything it's a different scale. Something that's fine with 1 million users is not the same as 10 million.
I would say it's different - different ownership, different direction etc. Time will tell what the outcome is. Projects have been axed and new 1s will appear.
The changing of staff has definitely hurt Twitter. Whether they can recover is a different question.
It does not. They have more frequent and longer outages now. Heck, when Musk tried to do a town hall for DeSantis to announce his run, the livestream was buggy specifically because no one had returned one of their vendors phone calls. That's a stupid reason for a major fuckup.
You're getting downvoted, but you're correct. Twitter was profitable in 2018 and 2019. It then took a bath in 2020 (like almost all advertising-based businesses), and then was projected to recover to profitability in 2022 before Musk announced the takeover, which threw everything into a tailspin.
I agree in general, but network effect companies are highly vulnerable to being out-grown. A bigger rival with a bigger network is inherently more attractive to users, and it's competitive advantage increases exponentially with size.
The only way to avoid that I know is to address a specific target audience and scale up to dominate that. Tumblr has achieved this. A rival then can't dislodge you because you already own the relevant network. It's still risky though, because if a rival builds a product that covers the general audience and also servers that subset well, then the subset might decamp. Hence Tumblr trying to break out of it's niche. G+ addressed a lot of niches very well, but Google just wasn't interested in that kind of network.
why would the current shareholders want anything other than profit (which is by proxy measured by growth)?
Shareholders care not for employee happiness, in so far as said employee is working and producing. Ditto with user happiness - if they're not happy they can leave. By not leaving, they must be happy to stay.
I think these proposals to "change" the metrics is as flawed as the current system.
on of my favourite books is "Small Giants: Companies That Choose to Be Great Instead of Big" by Bo Burlingham. It's worth a read if this is something that interests you.
Profit is a balance between income and expenses. He's hired a ton of people in hopes that they could radically increase their revenues. So it's a little rich for him to complain that Reddit isn't profitable when he's the one who made the choices making that way. In contrast, they could have taken the path of Wikipedia or Craigslist or Whatsapp, keeping the costs very low as a way of achieving profitability.
That was the path they took for the first 5-6 years, it didn't work. Tech savvy userbase with adblock and nobody bought Reddit Gold. Remember the monthly donation bar for their server costs? It never got close to filling. That was pre-new reddit.
So they got investment and scaled up to everyday users. Terrible redesign but at least the site doesn't look nerdy anymore, right? There are now actual advertisers on board. People are paying for badges and hats. They are tracking the shit out of people and pushing the app. They're on the way to profitability, and the next step is to cut out the old guard - who they couldn't monetize anyway - by removing third party apps.
Their costs are almost certainly ridiculous but their plan is either to become the next TikTok or crash and burn.
I'd rather contribute to something that is actually going to be successful.
If you say you need £1000000 to go to space, and ask for £10 sponsorship, if you tell me you've so far raised nothing, what chance is there of my money going to use as intended? If on the other hand you've raised £999000 I can be more confident you are actually going to reach your goal.
Depends on whether you view your donation as a good will gesture/reimbursement of sorts for services rendered – or if you consider in an investment with more clearly defined objectives at the end of the fundraising campaign.
I suspect it's just basic human behaviour. If other people are doing it, then it's somewhat normalised.
Also personally, it seems to me that if you have a goal, then that's a minimum. If you don't reach it, the thing doesn't happen. A website never reaching its funding goals is one that seems more likely to shut down, and what's the point of supporting something that could shut down tomorrow because it can't pay it's way. I know that's self reinforcing but there it is.
Reddit took $1.3 billion in investor money. What makes you say they're not having their chain yanked? Going public solves an investor problem, but I don't see it solving anything for Reddit's community.
Your implication is that if they don't need more money, they can just ignore all those investor-owned shares? That doesn't make a lot of sense to me. Reddit's an odd duck given their ownership history and their investors. But I don't think they're that odd. Nobody gives you that kind of money without expecting to be well paid and soon.
> implication is that if they don't need more money, they can just ignore all those investor-owned shares
No, they can ignore the venture capitalists' shares. Reddit's Series F was led by a mutual fund. Most of Reddit's shares are non-voting common stock, under a voting-rights agreement or held by non-VC investors.
The difference is meaningful when tracing incentives. Venture capital, almost by definition, involves a high-loss high-reward portfolio. Most bets are expected to bust. That makes a middling bet that doesn't return the fund essentially worthless, which in turn encourages shooting for the moon. Late-stage private portfolios cannot sustain heavy losses. They are looking at preservation of capital in addition to returns, which makes them fundamentally different from VCs.
Shorthanding all investors in tech companies to VCs denies you visibility into a rich spectrum of actors, incentives and alignments.
> Do you know how much control the investors have to change the board composition if they are ignored?
Most of Reddit's shares were issued in the era of founder-friendly voting rights agreements. The fact that those investors don't have anyone on the Board means they don't have the right to elect one to it. Private-company Board rules are Byzantine. But they're not thoughtless.
Twitter's problems started with VC investment where they were always compared against Facebook. I don't think Wall Street is much better, but by the time they went public, valuation and growth trajectories were already established by the VC narrative.
Yeah, I don't know how it is for everybody, but I'm reminded of the line, "A good horse runs even at the shadow of the whip." When I've been at places that have taken VC money, there's always a deep, pervasive awareness that the deal is "exit or bust", and that every investor call should include good news in up-and-to-the-right form. At least with us, they didn't have to do much explicit yanking of the chain. Probably for the same reason that Fat Tony doesn't often have to remind people that he expects to be paid on time.
The yanking doesn’t even stop then; it just changes who is pulling. Various institutional investors are all over Google to do better than it is. Google makes billions of dollars a year. More. More. More.
Google has founders shares. Everyone always like to blame Wall Street. Management listens to them not because they have board seats but because they want to keep the equity based comp party going.
No. It's a term specific for those investors working with: I don't expect you to survive, but if you don't get at least 10000% of return, you could as well be dead.
