by Thomas Euler, also published at Medium.com
October 25, 2016
About two weeks ago I came across a group which was just forming at the internet’s edges. It’s mission statement: To acquire Twitter and turn it into a co-op that’s owned, in parts, by users. The group’s initial spark was this Guardian article by Nathan Schneider, a prominent figure of the so-called Platform Cooperativism movement. Since then, more than 170 people gathered on the group’s channels for collaboration (Slack) and decision-making (Loomio). Last week it launched the first iteration of its campaign (all info to be found here). The latter consists of a petition and accompanying video to raise awareness for the cause.
I really liked the idea and was on board straight away. After all, I had written something along similar lines in the conclusion of a piece I published this summer. In there, I argued why Twitter’s current business model is flawed and why it should focus on its ecosystem instead of ads when it comes to revenue creation. I wrote:
Twitter is a very fragmented service that creates all kinds of values to different people. Some of them are more easily turned into a business case than others. An additional issue for Twitter: Many specific cases are better catered-to by other services. If you want to flirt, you go to Tinder. If you want to discover music, you go to Spotify or Soundcloud. If you want to find business folks, you go to LinkedIn. In some cases, there are even (and always have been) services built upon Twitter that do a better job at things Twitter should do, as for instance the currently hyped Nuzzle. On the flipside, no other service does all those things at least at a decent level. Twitter does. The questions are: What value is there to having a highly diverse ecosystem that does many things at least okay AND how do you monetize this?
As the gold standard for being a large scale advertising distribution platform on the web is targeting, personal user data is key. But while Twitter knows what you talk about, it doesn’t know who you are. Sure, they might use stuff like pattern recognition in order to make educated guesses but they remain guesses non the less. Facebook knows. So, this is not the right battlefield. Many people knew so when Twitter started and by now, I assume, even Twitter knows. Advertisers certainly do.
Also, I offered a solution as to how the creation of a better business model should be approached by Twitter:
Instead of trying to create a sellable product, Twitter should think of itself as what it is: One of the internet’s most relevant ecosystems (at least to this day). That is, they should create something like a monetization API. What do I mean by this?
They should give tools to their users that allow them to come up with different monetization scenarios and then collect a ‘tax’. This would obviously contain cases where you need actual APIs but not necessarily only that. I think there might be ways even less technically adapt users would like to use Twitter for monetization scenarios. Activism is a big thing? Then let activists use Twitter to raise funds (and keep a small share). People believe their followers would like to support them? Fine, give them the tools to create a ‘donation’/patreon-like payment system (and collect a tax). And so forth. I bet there are many scenarios we don’t think about but someone does.
That’s basically the approach Amazon is increasingly taking as it is probably the best business model when you provide infrastructure. And Twitter right now is exactly that to me: Infrastructure (which allowed a substantial ecosystem to grow).
(Sorry for the heavy self-quoting but it represents the backdrop for my thinking on the issue at hand.)
Alright, but why turn Twitter into a co-op then?
If you go along with my line of reasoning so far, you’ll realize two things. First, it’s a rather drastic diversion from the current business model. Second, it’s predicated on a strong and engaged ecosystem (You know, like in the early, exciting days of Twitter when everybody was allowed to use their API — which created way more innovation than Twitter itself ever did).
None of those issues is necessarily dependent on a change in ownership structure but it would certainly help.
While A business model could certainly be changed otherwise, it’s hard to pull-off when the stockholders’ interest is to get the company to profitability asap. ‘But’, you say, ‘You certainly wouldn’t have to quit the advertising model straight away! You could (and likely should) introduce and improve new approaches in an iterative manner. No need to stop serving ads in the meantime!’ True. Yet, even this seems highly unlikely given the current mood of Twitter investors.
As John Hempton, CIO of the fund manager Bronte Capital, put it in his take on the Twitter situation:
“The best bastards are from Wall Street. And this needs a Wall Street bastard.”
Wall Street doesn’t want Twitter to experiment anymore. It wants it to focus on increasing efficiency and cutting costs. Now! Certainly investors don’t want to see (another) phase of experimentation. In contrast, an ownership structure focused on long-term thinking rather than quarterly results — as is the case with co-ops — would allow Twitter to come up with new means of revenue generation more in-line with the very nature of its service (fragmented ecosystem, infrastructure).
So, let’s get to the ecosystem-side of things. Does a Service need to be owned by its users to become a strong, vibrant ecosystem? Of course not. Look at Amazon, YouTube or AirBnB. What’s necessary though are aligned incentives. I argue: nothing does this as well as actual ownership. It creates real skin-in-the-game and encourages taking a long-term view. That’s exactly what Twitter needs.
Further, distributing parts of the surplus¹ to users might have several beneficial side-effects: More activity on the platform. More upside for content creators to share their work on there (note that this also includes institutional users; the media comes to mind quickly as a potential beneficiary). More interest in developing innovative apps and services based on the (re-opened) APIs. In short: It might help to get Twitter back on a healthy track by all business measures.
Add to this a bunch of further advantages on the softer side of things, e.g.:
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Users would get a voice in how to deal with the ongoing issue of verbal abuse on the platform which is often mentioned as shying users away from Twitter.
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Employees — who would also be co-owners of the co-op — would have a long-term incentive to stay on-board. This might, at least to a degree, lessen the talent–drain Twitter recently encountered.
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Winner-takes-all effects are often evident in markets where platforms profit from strong network-effects. This, in turn, fosters the emergence of monopolies or oligopolies. Twitter-as-a-co-op could work as an alternative model solution without government intervention.
Taking all this into account I conclude: The route suggested by the #WeAreTwitter campaign might not only present a nice idea but could actually make sense for Twitter the Company given its current situation.
The complicated bits
Let’s be clear though: Neither is it an easy endeavour nor are all questions answered. In order to allow you to understand the issues we still need to solve I’ll address some of them here. The group is still forming and by all means open to new collaborators, feel free to join and contribute your thoughts and skills. Nathan compiled all the relevant information and links on this page.
Board and management structure
In a world where this initiative is successful, designing a structure that gives a voice (and vote) to owners but still renders the organization able to make decisions in a timely manner is going to be a challenge. There are some ideas and assumptions but at this scale its all going to be somewhat experimental. Whats definitely going to play a role is fragmentation — for instance will open APIs allow for several opinionated groups to implement even conflicting visions on top of core Twitter. This might help.
One important step is going to be the crowdfunding stage. Different jurisdictions allow for different approaches with regards to this. We are currently in the stage of finding out which is the most favorable for our mission.
Getting current stockholders support
The initial plan is to try to get buy-in from (some) current stockholders. For the reasons I laid out here there is a rational behind such a scenario. Yet, I have to assume most Twitter shareholders don’t read my Medium. Getting to talk to them will be critical. While there is a group in the Valley working on setting-up a meeting with people from Twitter, this will hardly be enough. (So, if you have some contacts and support this idea: Your support would be very helpful!)
Disclosure: I’m a contributor to the #WeAreTwitter initiative. This post, however, represents my personal view and is not an ‘official statement’.
¹ There is a notion floating around that Twitter-as-a-co-op would be a non-profit. That’s not the case. It would definitely be a for-profit entity. The difference, however, would be how the surplus is used and distributed.
About me
I work, think, write and speak about digital business, technology and decentralized systems. I’m the CEO of Eck Consulting. My analog residence is Munich, Germany. If you’d like to connect, follow me here on Medium, on Twitter or add me on LinkedIn. I’m always glad to talk & interested in inspiring discussions. For more info take a look at my about.me page.