For better and sometimes worse, Twitter is one of the most powerful forces onÂ the planet. Twitter has arguably played a critical role in at least two of theÂ defining political upheavals of our era: The Arab Spring and the election of aÂ political outsider, Donald Trump, as president of the United States.
Every day,Â Twitter contributes to the political debate, the sharing of ideas and the widespread dissemination, via links, of news articles and the otherwise obscureÂ findings of academics and nonprofit studies. And, each day, this activity onÂ Twitter contributes to meaningful, ongoing political debate acrossÂ societies and across the political spectrum.
Of course, Twitter also is filled with conversations related to our everyday lives.Â Sometimes they are meaningful, sometimes they are not. But, for many people,Â Twitter plays a central role in how they connect with friends and family. LikeÂ every social platform, there is noise filled with high-minded discussions as wellÂ as seemingly mundane conversations.
What is perhaps unique about Twitter is the dichotomy between this valuableÂ role in empowering and connecting people and its ongoing lack of profitability.Â With restructuring charges, Twitterâ€™s net loss in the fourth quarter of 2016Â was $167 million, or 23 cents a share, and less than 1 percent year-over-year revenueÂ growth. For 2017, the company has announced plans to achieve profitability,Â largely through staff cuts. Skepticism that profitability will be achieved is high.
At the same time, many believe these layoffs mortgage the companyâ€™s future by cutting the sales force that generates revenues and the R&D staff thatÂ makes the service more appealing over the long term.Â In 2009, after writing a book arguing that extreme and growing economicÂ inequality would lead to societal dangers, for our politics and the health of ourÂ economy, I became an active Twitter user. Over the years, my activity hasÂ waxed and waned, but Twitter remains the central mechanism I use to shareÂ my ideas.
At the same time, as an internet marketer, I have developed TwitterÂ campaigns for myself and commercial clients. The net result is that I have a strong understanding of how Twitter can build awareness and influence in the political, nonprofit and commercial realm. Most important, my belief in theÂ fundamental value of the service, and the benefits it brings the world, is veryÂ high.
A simple proposal
Twitter, like all social media, has evolved dramatically since its founding. WhatÂ the founders fully envisioned we cannot know. My guess is Twitterâ€™s foundersÂ never envisioned corporate accounts with millions of followers. I believe theyÂ set out to create a service that would connect people with each other.
Nonetheless, there is one thing we do know: Today, many business entitiesÂ have millions of followers and communicate with these followers using TwitterÂ as a tool to promote their products and services. This is free advertising, no ifs, ands or buts.
What is perhaps unique about Twitter is the dichotomy between this valuable role in empowering and connecting people and its ongoing lack of profitability.
So, hereâ€™s a proposal to radically change the economics of Twitter: ChargeÂ businesses that exceed a set number of followers (perhaps 250,000) a monthlyÂ fee based on their total number of followers. To provide a sense of scale, here areÂ the follower counts for a cross-section of well-known brands:
- @TeslaMotors 1.4 million
- @Verizon 1.7 million
- @Pepsi 3.1 million
- @CocaCola 3.4 million
- @McDonalds 3.4 million
- @Intel 4.7 million
- @Marvel 4.9 million
- @GoogleChrome 6.1million
- @SamsungMobile 12.1 million
- @Google 17.6 million
I suspect most of theseÂ businesses spend large sums (with in-house personnel or outside agencies)Â planning and developing their Twitter activities â€” a clear form of advertising that provides value, with no portion going to Twitter. Why would it be wrongÂ for Twitter to capture, through fees, a piece of the economic value its serviceÂ brings these companies?
To assess the potential magnitude this change might have on Twitterâ€™s bottomÂ line, letâ€™s take a hypothetical example: Suppose Twitter collected an averageÂ annual fee of $600,000 from 2,000 businesses. This wouldÂ represent increased annual revenues of $1.2 billion. Of course,Â there would be costs associated with implementing this policy, but the upsideÂ is enormous: Most of this $1.2 billion increase in revenues would drop straightÂ to the bottom line.
The reality of value delivered
I donâ€™t claim to know what the right fee is, or how this fee should increase byÂ the number of followers involved. But, letâ€™s ask the most importantÂ question: Would a major brand leave Twitter if a new fee of $50,000 per monthÂ were imposed? Companies with millions of followers derive far greater economicÂ value than this monthly sum. Indeed, I strongly suspect many companiesÂ spend far more simply staffing their Twitter-related social media campaignsÂ and working with outside agencies. Of course, this would be a cost, which addsÂ to these existing expenses. But, once again, I strongly suspect tweets bringÂ these companies far higher returns than this proposed monthly fee plus anyÂ social media management expenses. I also believe these companies know it.
In short, a central reason for Twitterâ€™s profitability problem is that it has beenÂ far too good a deal for large advertisers (defined as any company with a substantial Twitter following, which means the company has an active,Â significant Twitter presence).
Yes, I think itâ€™s legal
I have discussed this idea with a limited number of colleagues. Inevitably, theyÂ ask whether charges of this type, levied solely on companies with large followerÂ bases, might represent some form of illegal price discrimination. MyÂ understanding is that this suggested revenue idea is entirely lawful.
Hereâ€™s how it can be done:Â First, letâ€™s take a â€śworst caseâ€ť example that assumes, under the applicable law,Â corporations that are Twitter users have the same rights as people. Then, these charges could be defined as advertising fees on any Twitter user that has moreÂ than 250,000 followers. (Remember, Twitter allows users to block followers, soÂ no one forces a person or corporation to move from the free classification to theÂ new, higher-follower paid classification).
Second, discounts for different categories of advertisers (which can be definedÂ by purpose or commercial segment) are, I believe, legal. As a result, individualsÂ and entities with a non-commercial purpose, such as politicians, journalists,Â academics, news entities, governmental entities and all nonprofits could beÂ exempted from these advertising fees. They would effectively receive a 100 percent discount. Indeed, significant discounts for nonprofits and educational institutions are commonplace across the spectrum of internet services.
Why would it be wrong for Twitter to capture, through fees, a piece of the economic value its service brings these companies?
Finally, the group that may present the most significant issue for this proposalÂ are celebrities: movie stars, athletes, authors and musicians. One again, IÂ believe the issue of category discounts resolves this concern. Twitter couldÂ decide not to charge these people â€” who for many Twitter users add value to the community â€” or to charge a lower fee (a specific discount for this category).
Now, letâ€™s look at the alternative scenario, and assume corporations do notÂ have the same rights as people. Twitter can freely exempt all individualsÂ from charges. Here, Twitter could require corporations to pay advertising feesÂ based on their volume of followers, with fees starting when a firm has moreÂ than 250,000 followers (or whatever number is deemed appropriate). In this scenario, discounts would apply, as frequently happens now online and offline, to entities that have a political, informational or non-commercial purpose (i.e.Â news entities, political entities, governmental entities and nonprofits). The oneÂ difference is that on Twitter these discounts would total a full 100 percent.
Adding value for corporate users
Next, Twitter could take a small piece of the large revenue increase discussedÂ here and create services that add additional value for these paying, largeÂ corporate users. I can imagine a wide range of mechanisms that Twitter, withÂ access to its â€śfirehoseâ€ť of data, could deploy to increase the effectiveness ofÂ large businesses actively using its service.
New services may be valuable, but are not necessary
In recent years, Twitter has based its path to profitability on serviceÂ enhancements designed to increase user engagement and growth, and on aÂ transformation into a media consumption platform. Twitterâ€™s recent loss toÂ Amazon of its â€śmarquee dealâ€ť to stream NFL Thursday night games casts anÂ additional shadow on this often-questioned media-related strategy.
As an active Twitter user, I also can imagine a wide range of serviceÂ enhancements that would increase my engagement. For example, I simply canâ€™t imagine why Twitter is not the premier source for an automated, real-time feedÂ of the personalized news topics that meet my interests. The existing â€śNews,â€ť â€śTrendsâ€ť and #search features fall short of satisfying this craving. However, issues associated with creating more engaging features are outside the scope ofÂ this article.
Nonetheless, new service features, while desirable, are not needed for Twitter toÂ achieve far higher profitability: A radical shift in its revenue model will enableÂ Twitter to achieve the profitability it merits. Twitterâ€™s existing user base already delivers enormous marketing and advertising value to businesses. To date,Â Twitter, in contrast to other media, has not sought to capture an appropriateÂ share of the value its service creates for businesses benefiting from theÂ use of its platform.
Jack, give me a call
Jack Dorsey, we have never met, and you probably resent people like meÂ suggesting ideas that no doubt you have considered and rejected. But, letâ€™s face it: Your business is not improving. You are at a crossroads: You can be YahooÂ (without a buyer) or a reimagined business, with Facebook-like potential. IÂ suggest you choose the latter. Letâ€™s talk.