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Twitter Should Adopt an Identity-based Business Model
Twitter should start charging for handles, and they could make more money while improving the relationship with their users and startups in their ecosystem. The company is sleeping on a goldmine–– it can be the ICANN of social media because Twitter is a de facto identity system for a significant part of the internet.
Twitter would make $4.8b a year if they charged $12/year for a handle to their ~400m users (it costs $12 to renew a .com domain). For comparison, their total revenue for 2021 was $5.1b. Not every user would pay, but more income could come from auctioning off new names and taking a commission from secondary market sales. We check for available domain names at my company and match Twitter handles when creating a new brand. Spending at least $10k on a Twitter handle would make sense if we spend $100k on a domain name.
People do not like to pay for things they used to get for free, but you do not own it when you do not pay for your handle. Many use a Twitter account as their online presence, and 12$/year is an excellent deal for gaining more control over your identity.
Better business, better product
Twitter is struggling with spam, impersonations, and scams, and these issues would mostly go away if the platform charged for handles. Twitter scams are profitable because automation and free access to the platform result in marginal costs—even tiny income per targeted user amount to substantial revenue at scale. This business model falls apart if they pay $12 per account.
Users could still create free accounts, but their handles would be their ID: a string of numbers – hard to remember and not prestigious. They would have to pay for a short handle, and real users would have a mix of followers who pay for handles and those who do not.
Embracing the ecosystem
Relying on advertising revenue puts Twitter at odds with startups building its ecosystem. Advertising makes up over 85% of Twitter’s revenue, so they cannot tolerate startups “stealing eyeballs”. At the same time, every startup building on Twitter’s social graph and the naming system adds value to the Twitter platform, and Twitter needs a new business model to embrace them.
Imagine you could have your Twitter handle automatically reserved for you on Clubhouse, Substack, and other products. As a user, you would benefit by having consistent branding without fighting over the same handle everywhere. It would remove a layer of complexity for startups and make it easier to build critical mass. And the more successful the startups using Twitter’s naming system, the more money Twitter would make because more people would pay for handles.
Imagine you could automatically follow the same people on Clubhouse that you follow on Twitter (and the other way around). Startups could integrate with Twitter’s social graph since their interests would be aligned. Every startup building on Twitter’s social graph would expand it, making it even more valuable.
Social Graph as a Platform
I am convinced Twitter can be larger than Facebook, and what is holding it back is that its business model is built around advertising. Advertising works well for Facebook because it is a closed, invasive platform, which means they have plenty of data about their users. Having lots of personal data allows them to target ads more effectively.
Twitter needs to become as open as possible and embrace the role of the social graph as a platform. To do that, they need to cut their dependence on advertising revenue.
Thanks to Rhys Lindmark for reading a draft of this.