“A HOUSE OF CARDS WAITING FOR THE RIGHT GUST OF WIND”: TWITTER’S REVENUE IS STAGNANT, AND ITS CEO IS MOVING TO AFRICA—WHAT COULD GO WRONG?

Twitter’s valuation has never made sense, except for its user base of celebrities and journalists and Donald Trump. Can Jack Dorsey find enough new users to change the game? BY NICK BILTON Last month Jack Dorsey was standing in Addis Ababa Bole International Airport in Ethiopia, which, according to reviews, has “insipid food choices” and a “pathetic duty free,” when he tweeted a major announcement: “Sad to be leaving the continent…for now. Africa will define the future (especially the bitcoin one!). Not sure where yet, but I’ll be living here for 3-6 months mid 2020.” At Twitter and Square, the two companies Dorsey runs almost 9,000 miles away, Dorsey’s employees were as perplexed as everyone else. According to people close to Twitter, no all-hands had been called to explain that their boss was planning to spend a good chunk of next year overseas. There was no explanation—just the tweet. Had someone like Mark Zuckerberg or Tim Cook or even off-the-cuff king Elon Musk sent a similar tweet, their companies’ respective stocks would have plummeted, lobbing a few billion dollars off their valuation; the CEO of a major public company moving oversees without much explanation isn’t normal. But at Twitter, the markets barely registered the so-called announcement. That’s because Twitter is not like any other public company, and its investors are as perplexed as ever about how to judge its worth. Its valuation doesn’t match its revenue. Its user numbers don’t match its influence. And, unlike Apple or Facebook, Wall Street still isn’t sure if Twitter’s CEO, Dorsey, is one of the metrics they should use to decide that value. I’ve long since given up predicting the market capitalization of Silicon Valley companies. There are simply too many random factors, like Russian interference, tens of millions of “users” turning out to be bots, or, more often than not, the firing of a big-shot CEO. Uber, I once believed, could be worth $100 billion, or nothing. (It’s now bobbing somewhere in between.) I once assumed the scandal surrounding Facebook and Russia would chop off a good quarter of the social network’s value, and while it did fall by a hundred billion dollars or so after the Cambridge Analytica news broke, Facebook is now worth more than half-a-trillion dollars, and continues to grow. As for Twitter, a company I’ve covered for more than a decade, while the company’s value has gone up and down like a yoyo, my predictions of where it might be at any given moment have always been off by several quarters, if not years. In 2015, for example, as the usual chaos was gripping the Twitter boardroom and Dorsey had taken over for the third time (his second as CEO), I guessed that the social network’s stock would fall dramatically. While I was right for a while, Twitter’s value is now in the same ballpark as when Dorsey returned, in part thanks to the Tweeter-in-Chief. That’s not necessarily a good thing. Half a dozen people I’ve spoken with who once worked for Twitter or who are current investors have voiced concerns about how long the company can continue on its trajectory of remaining stagnant as a platform with an absentee CEO, and whether it can reverse course on its flattening ad revenue, which increased by a negligible 8 percent this past quarter. (For comparison’s sake, Facebook’s increased by 28 percent. An ex executive who left Twitter after Dorsey returned to the company said the only reason Twitter is still around is because “it’s like the monster from Stranger Things that just can’t be killed and comes back every season.” (The executive left the company precisely because they saw the future wherein ad revenue would slow and, eventually, fall.) Another former senior manager described Twitter’s business model as “a house of cards waiting for the right gust of wind.” And one current investor noted that the stock this week was lower than it was when Dorsey came back almost four and a half years ago. User growth hasn’t fared much better. Twitter now has more than 2 billion users less than Facebook. In America alone, only 30 million people use Twitter daily. Last week this sentiment was made [public by one outspoken Twitter investor: Scott Galloway, a marketing professor at NYU’s Stern School of Business, who wrote an open letter to R. Kordestani, the executive chairman of Twitter, pointing out that shareholder return since Dorsey came back was negative 15 percent, compared with Google, which was up 153 percent; Facebook, up 120 percent; and the entire S&P 500, which was up 50 percent. “The poor citizenship of Twitter is bad. What’s worse is Twitter’s malfeasance coupled with scant benefit to stakeholders. The platform is all the calories of big tech (poor citizenship, divisiveness, hate) without the great taste (stakeholder returns),” Galloway wrote. “At least tobacco stocks performed well.” (Zing.) Galloway demanded that Dorsey be ousted from the company again. This seems unlikely—when I spoke to Kordestani a couple of years ago, he indicated Dorsey wasn’t going anywhere: “There is no Plan B.” So how is Twitter surviving with slowing revenue, tepid user growth, flat valuation, and a CEO about to go backpacking around Africa? The consensus from almost all of the current and former employees and investors I’ve spoken with is that Twitter’s saving grace is not how many people use the platform, or how much money the company might pull in, but rather who is doing the tweeting. The best way to explain that is with an anecdote not about Twitter but about Ben Smith, now the top editor at BuzzFeed. At the time of this tale more a decade ago, Smith was an intern at the Forward, which serves a primarily Jewish audience. Anyone who’s ever met Smith knows he’s whip smart and not one to hold back about how he really feels. One day, as the story goes, fed up with low readership, Smith raised the issue with an editor, sarcastically, noting that only “two Jews read” the paper. To which the editor responded: “But it’s the right two Jews.” Twitter, then, is still worth $23 billion because its users are celebrities, journalists, and politicians. But if that can't be monetized, what, really, is the point? Ironically, Dorsey's moving to Africa might be exactly what Twitter needs. Like Facebook, Twitter’s user numbers have basically plateaued in the West. In the U.S. specifically, one former Twitter employee said that it’s almost impossible to get new users to sign up. “Since Trump became president, everyone in the U.S. has heard of Twitter—everyone!—[but] it’s not like they’re going to decide to sign up tomorrow because they heard [about] this platform the president is on. If you haven't signed up yet, you’re never signing up.” Which leaves emerging markets, like Africa. Currently, 1.25 billion people live on the African continent, and only 388 million are online, according to the Internet Society, which promotes the development of the internet around the globe. That leaves a whopping 800 million potential new customers who could get a smartphone and sign up for Twitter (and Square, Dorsey’s payments platform). More than half the continent is still operating on the 2G network, which has been decommissioned by dozens of countries. Which means Africa is about to go through what the rest of the world experienced more than a decade ago. This could be Twitter’s moment to redeem itself, avoiding the missteps it made in the United States. More likely, however, its introduction overseas will simply cause more chaos on the global stage. But hey, at least investors will be happy.