Also Out at Twitter: Engineering Head Roetter (and More to Come)
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Twitter does not need more than 1,000 employees and could probably get by with <500. They have over a billion dollars in revenue and would easily make a solid profit if they cut staff back to what's actually necessary.
The problem is that they don't seem to have any path to growth. If they slash headcount in half and you've got most of those people dedicated to keeping the lights on then it's hard to imagine a future where they get much bigger and if investors see no path to growth then their stock price is going to take a beating.
[1] https://finance.yahoo.com/q/is?s=TWTR+Income+Statement&annua...
Your math is off by an order of magnitude. Twitter spends >$100M per quarter on stock-based compensation alone. [0] Just what do you think Twitter's major expenses are in "Research & Development" (for example)? I guarantee you that employees are by far their number 1 line item (as they are for most tech companies).
Twitter's Q3 2015 expenses were ~$500M. Do you really think that the majority of that wasn't salaries?
[0] http://seekingalpha.com/article/2253623-twitters-stock-based...
All public companies have to report that stuff and it is usually free to download from their website. It is an incredibly useful skill to learn to read annual and quarterly reports. You can find out if your company is about to tank ;-)
1. User A posts messages either to themselves or by addressing another user.
2. Users B, C, D .. Z subscribe to messages from A and see them on their own feeds.
There are no concerns about message QoS and you don't need a consistency so you can basically blast out messages and if B views it before C then no biggie.
Twitter's basically a pub-sub messaging platform without any kind of need QoS... what am I missing? Why does this require 1000 employees or even 500? it seems like something that could absolutely be run by 50 people with software (feature, optimization) engineers concentrated in one location and operations (test, deploy) teams spread out across the globe at major hot spots. Obviously you also have some stuff like sales and marketing, but I still don't see how that requires 1000 employees.
I don't know about the 500 vs. 1000 employee question, but Twitter is a big engineering challenge.
Nobody's debating that. If it weren't a "large scale distributed system" then the debate would be about 3 employees vs. 10. The core experience without scale could be made by a single engineer.
But running a service like Twitter doesn't require 4,000 employees, even at scale. Facebook has "only" twice as many employees, despite a 10x more complicated product and 12x as much revenue.
Now, I do think there's more to it, once you start adding in monetization and business features, but it doesn't take that many people to run a highly scalable distributed pub/sub.
There were quite a couple of relevant posts on Twitter Engineering Blog if you are interested:
https://blog.twitter.com/2011/spiderduck-twitters-real-time-...
https://blog.twitter.com/2012/blobstore-twitter-s-in-house-p...
https://blog.twitter.com/2014/manhattan-our-real-time-multi-...
https://blog.twitter.com/2014/push-our-limits-reliability-te...
https://blog.twitter.com/2015/building-a-new-trends-experien...
It is not simple but it also doesn't have to be 1000 employee-type of complexity.
As a counter-example I'd point to WhatsApp was handling 1B users with 50 employees. That includes custom apps for fringe phones used in 3rd world countries. It included media sharing, it including managing and ops.
I know they are not Twitter but still 50 vs 1000 is a huge difference.
They've traditionally credited Erlang and FreeBSD as one the techologies that was responsible for their success. Not sure if Facebook will strong-arm them into switching to whatever Facebook is using.
One can then ask, well, why don't companies look at that and learn and do the same? And I think the answer is once they headed in one particular direction with their choices, they are more susceptable to the sunk cost fallacy. Coming in one morning and telling everyone, screw it, we picked the wrong direction 2 years ago. We'll lay off 50% of the people and re-write the whole thing in Swift using this other stack. We'll cut half the products and work on new ones. Etc. That is almost impossible to do. So they are sort of bound to heading in the direction they've been heading, even if individual people will all see it is probably the wrong direction.
Twitter is not an engineering cost first company.
Right, though they retain messages until their recipient comes online.
There's healthy ways to grow, and unhealthy ways. I agree with you that twitter (the company) needs to be happy with the size of twitter (the product), but that doesn't mean the company needs to stop growing. There's plenty of opportunities to leverage the technology stack and the userbase of twitter to get into other markets and allow growth to continue. Their future growth is not in getting more users to sign up for the twitter microblogging service, it's in other products like Vine and Periscope (and potentially a longer-form writing integration like has been rumoured)
Are they not past the "growth" stage and very much into the "time to start actually making money" stage?
What on earth use is growing 2 more different sharing networks when your first sharing network is at capacity and isn't pulling it's weight and bringing the money in.
Perhaps someone using Twitter to coordinate their small group or family meet-ups denounced CNN, Bloomberg or Reuters as "nonsense" when those organizations appeared on Twitter.
And that's the core product problem - there's always a potential that the old core idea is no longer relevant, and perhaps a stream of photo updates (Instagram, Twitpic), a stream of video updates (Vine) or real-time video broadcasting (Periscope) is the next big thing and therefore the new core idea.
Twitter execs have been trying to underscore their "logged-out users", as in views on embedded tweets and other pageviews, and are adding ads in those places.
Twitter's IPO valuation was based on persuading the market that they were another Facebook, i.e. a sticky platform that would extend out to solve problems in varied industries.
I agree that their media business is really solid. They acquired TellApart, Mopub, and a bunch of smart ad tech people.
The problem is that a solid media business is not what investors were hoping for. If that's Twitter's new story then they're a well-equipped media/ad tech company -- another AOL, Yahoo, or even Criteo. Those are real companies that generate revenue but they're not the sorts of companies able to recruit top-level talent, retain and empower their acquired talent or garner 10x valuations.
That kind of sums up the current bubble, doesn't it?
There's no premium ad inventory chasing logged-out randos.
Twitter should not have gone public, or at least not at the valuation it did. I think those who invested just wanted to ride Facebook's coattails, assuming that a new "social networking" bubble could be created and investing in any such company would be an easy buck. Surprise! You actually need to evaluate a company's individual merits, rather than expecting that any Silicon Valley IPO is a guaranteed windfall success.
And how in the world does Twitter have 4300 employees? The product should be sustainable with less than 10% of that.
Assumption for this comment: many of them are working in engineering.
I have thought about this for some years. I have no explaination yet, some hypothesis though. Many CEOs and VCs think engineering is key. CEOs don't know how many engineers they need. So often they have as many as they can afford and are rarely challenged for that. I've seen many companies where I look at a Kanban/Scrum board for the features and think "Hu? This is what they working on?", a lot of features have no impact. Number of features seems to be a function of number of engineers not number of good ideas (with impact). So there is no downward pressure on the number of engineers, work fills the over capacity. This leads to 4300 employees.
But far from sure, still wondering about that mystery of high employee numbers of many companies.
They've tried ads (promoted tweets), which doesn't seem to have worked well. They've tried analytics targeted at high-end users/companies, which doesn't seem to have much traction (though it does seem both useful and unobtrusive).
Paid accounts? What features would such an account have that free accounts wouldn't?
Longer tweets? That'll certainly change the culture drastically, but not necessarily for the better.
Richer content? Likewise.
Twitter seems like the contemporary company with the most valuable yet least profitable product.
It's an electronic wasteland and not the kind that makes money. I don't see how that ever changes.
If even a smallish percentage of key athletes/celebs/whatevers move exclusively to Instagram or something else, it would seriously disrupt Twitter. IG would love that, in fact.
Plus, how many people with over 10k actual followers are there really? Is $120/year times that number really going to make a difference for the business? Seems cheap and risky simultaneously.
Also, a lot of people would like a better anti-abuse system and some might be prepared to pay for it.
Really? You actually think Twitter has negative value as a company?
They have real revenue. Fire everyone except a few dozen employees to maintain the core services/ads. That'll let you collect at least $100 million in profit.
At a valuation of <$1 billion, Twitter would be a bargain.
I agree with your plan and would likely run the company like that -- except "just maintaining" a social network sounds like a long-term recipe for disaster too.
The share price would also tank with that plan, which of course won't fly being a public corporation. This is why they're in such a rough place.
A few expansion areas come to mind off hand:
1. Media distribution
2. E-commerce (get the hottest, limited supply thing)
3. Events & ticketing
4. Financial market alerts
5. AMA-style Q & As
6. Chat/AI services and integrations
This actually makes me wonder: if you increase or remove the length limits, how well would Twitter work as a private chat platform?
Because compared to the terrible internal "social platform" sites that some large companies run on their intranets, a company-wide private version of Twitter actually seems like a significant improvement. Use lists (including shared lists) as an equivalent to rooms or groups. That would give three different types of streams: your main feed (people you follow from across the company), the groups you watch or participate in (where most of the productive value comes from), and the firehose (to sample what's going on across the whole company).
As a bonus, if you add in a form of federated accounts, this could allow businesses paying for such a service to have a family of verified accounts on the public Twitter, all tied to their domain (similar to email addresses).
Facebook has a "Facebook at Work" enterprise product and, from what I hear, the company dogfoods its own platform for work as an alternative to email and mailing lists.
The idea may not be too far-fetched as Facebook actually does have an enterprise product, Facebook At Work. I think Twitter is too focused on other things to try it though.
6b. "Customer support in a box" services for companies that use Twitter to find and help customers with problems.
7. Micropayments: Twitter could monetize Likes using a Flattr-like micropayment system. Just add a "tip" button next to the heart button, to pay the tweet author $0.01. It could create a virtuous cycle of more tweets, more tweeters, and more idle funds in tip accounts for Twitter to reinvest elsewhere.
Then I've read heaps of great ideas here on HN about how they should be leveraging the real-time stream to be the go to place for what is going on for any issue.
What I don't understand is why nothing is changing, I've only been a twitter user for a few years but I've never seen anything change. I think they need to be pumping out lots of little experimental tools for finding, consuming and creating tweets.
This existed as a thriving third-party ecosystem, before Twitter dismantled it, http://www.mathewingram.com/work/2015/04/30/twitters-multi-b...
"Last year, Twitter effectively admitted that it needed third-party developers ... For anyone who had worked with Twitter in the past, however, this was a little bit like Fox Inc. asking for chicken volunteers to help it build a new hen-house. As far as I can tell, there’s little or no evidence that Twitter’s outreach program is working. What would Twitter be like today if it had embraced its ecosystem and tried to build on it instead of cutting it off at the knees? ... I think it would have a lot more goodwill to spend — both with developers and with users — than it does now, and I think many aspects of the service that it is now trying to build up, including smart recommendations and curation, would be a lot better off with outside input than they are now."
Would be a dream job for me to be on twitters payroll building experiments and functional prototypes.
That seems to signal a lack of creativity. Twitter has nearly 4,000 employees—there is simply no way you need that many employees to run their core services.
Twitter has already done some layoffs, but they could stand to do plenty more. They really don't need more than 1,000 employees.
The company was built with the idea that it'd be the next Facebook but there doesn't seem to be any path to that happening. They need to accept their market position and optimize on profiting from it. Fortunately, unlike Facebook, their core user experience is much simpler and should require way fewer engineers.
Right now they are trying to find other niches to fill so they can continue to grow, they are just not doing it very successfully.
If they actually got to $1.5b annual earnings, they could definitely justify a $12b cap. A P/E of 8 would be ridiculously low for the technology industry—heck, for any industry.
I'm not enthusiastic about Twitter and certainly wouldn't buy the stock, but the company also definitely isn't "worthless." There's certainly a path to profitability.
In this scenario they have fired everyone and given up trying to grow. A P/E of 8 would be way overvalued.
So - sack a lot of people, cut costs, hold cash in the business and disappoint investors... Will the investors wear that though?
I disagree. For one thing, a P/E of 8 is standard for industries which most think are either declining or entirely stable. Benjamin Graham used 8.5 as a "no-growth" P/E so it's hardly insane. [1]https://en.wikipedia.org/wiki/Benjamin_Graham_formula
Moreover, even without feature expansion, I do think Twitter will see growth, though that growth will be minimal. At the very least they stand to benefit from the ever-increasing number of people on the internet.
Anyway, I sold all the shares I could at $51, and then sold everything else at $31, so I clearly didn't feel like the price was worth that, but $12B for the company seems a little low to me. Given current news is likely to be taken as a reason to sell, it wouldn't surprise me at all to see the company get bought. Which I guess could push the stock up a little bit, like it did last week, but it would take months of that to get people's compensation back to where it was with RSUs that were handed out a year ago.
For reference most run of the mill companies trade somewhere around 1x revenue.
Why would their costs go down rapidly; stock based comp? Typically stock based comp has a strike price lower than the current share price. So they save but maybe not as much as the stock price collapse might suggest. Also, they'd still be unprofitable. A lot of professional investors feel they should cut costs, focus on periscope, and start making money off the new organisations that make money off of having access to information now. Things like charging the times and the journal for a live feed from ground action in Syria.
Professional investors should stick to investing, product management is clearly not their strong suit based on this laundry list of proposals. :)
Time and time again, companies come up with supply driven theses that give birth to products that fail. Demand driven products succeed. Knowing when to engage in M&A, sell assets, cut costs, expand to new markets and engage in corporate actions requires judgement that few companies have. It's not always about iterating on the product you already have.
Facebook understands this which is why they have made several key acquisitions. They're looking to be the home of the best innovations in social media; whether it comes from internal sources or external teams.
In Twitter's case, they have hit the limit of mind share in most markets. Everyone knows about it; few on the margin have incentives to sign up. Periscope has potential if data costs come down.
This is why people in industry don't always make it as CEOs. Knowing which game to play is key. Thinking like an investor is key too. Don't take it from me; take it from Buffett.
http://files.shareholder.com/downloads/AMDA-2F526X/840118979...
I'm inclined to say the best thing they could do would be scaling down expectations of bubble-level returns and focusing on value rather than screwing with the core service trying for unrealistic returns. The problem is that this would require compensating executives less and we live in a era obsessed with short-term returns.
Charging for longer tweets (either a flat amount or per char over 140) may be a good source of additional revenue. The majority of "normal" users wouldn't take advantage it, but many businesses probably would.
This would have the advantage of removing the char limit when people want to (enough to pay for it) but without drastically changing the culture since the majority of tweets would presumably still be under 140.
Would these future innovations alienate their userbase? Well do we have evidence they alienated the userbase previously. I doubt it.
While we can point to scores of #ragetweets about how Twitter is finished, finished, because they have replaced hearts with favorites, those complaints last about 2 days. Another example would be how embedded images would destroy Twitter (people said the same when Mosaic introduced images to the web in around 1994, as far as they were concerned, the internet had jumped the shark).
The fact is, Twitter has managed to slowly add features like hashtags and images without changing the essence of the product, engaged users will stick around if they keep doing so. I'd acknowledge that the one last negative sentiment was one close to HN's heart - the developer/API issues - and they still have to iron that out (so far, @Jack's #HelloWorld initiative from three months ago hasn't yielded). But I'm thinking more about features they can add to the core product.
Fairly obvious, and I think impactful, innovations we will see are:
* Long-form tweets - The 140 limit is confusing to Twitter newcomers. Meanwhile, Medium shows the power of a clean publishing platform where anyone can say something important without having to setup a blog and feel the obligation to keep posting. It helps them find an audience. Twitter has a giant ready population of people with interesting things to say and many of them are already using Twitter to say it, in less than ideal ways (too-long Tweetstorms, screenshots, linking to pastebins and 3rd party long tweet services). Designed right, I think they can introduce this with minimal impact on the normal experience and suddenly become a giant source of substantial content.
* Video - Similar argument to long-form tweets. They have a ready population of potential video makers and can easily find videos an audience. I imagine a lot of people discover YouTube videos from Twitter now; those could be directly served by Twitter in the future.
* Curation - Twitter's model of showing every tweet from every friend is archaic and doesn't serve the needs of most users. If I haven't logged in for 2 days, do I really need to see a blast of trivial tweets from 5 minutes ago? They have made some attempts to improve this (e.g. "While you were away" highlights, which so far are mediocre), but can do a lot more, e.g. showing most relevant/popular tweets from friends (see: Nuzzel) and going beyond just friends' tweets/retweets if something is relevant enough. I know moving to a Facebook-like filtered stream will enrage some hardcore users, so they would need to do so carefully and maybe with settings to keep it the old way, etc. ... but I think it will be a big quality boost for most users and also make native ads more effective.
* Apps - The official apps aren't exactly loved and lack consistency (e.g. Tweetdeck and several other official apps still can't render polls, an important mainline feature for a while now). A savvy product team could improve these across the board.
There are a lot more possibilities, and those are just features related to the core product, leaving aside monetisation opportunities such as buy buttons. Twitter has already moved in some of these directions and the signs are @Jack is intent on accelerating that effort.
[1] http://www.businessinsider.com/slack-expects-30-million-reve...
Despite the fact I agree the population is quite large, but I can guess at least 30% are marketing folks, 20% are HR and process people, and then the rest are developers. Twitter has done a number of acquisitions. I don't know how many people are running Vine in production today, but my understanding is their NY core team is still quite small. However, given Twitter has launched so many products (including all of the background projects they did to support their production), I won't be surprise if they have at least 10% of their entire engineering force doing infrastructure and operation, and then 40% divided into core product like Twitter, internal application developers, security, solution engineers, etc.
When a new CEO is in charge, some layoff and some re-org usually happen. Some projects have to be closed, some have to be sunset, and some have to be merged. Let see how much they can trim down. It usually take a year to complete the evaluations and projecting new positions.
Just a few more random thoughts... Twitter's biggest asset is its core product and they should not meddle too much with it. And I think they should be able to make a company profitable with just that. Even though the product itself is really simple, there are many use cases of it that are not all easily transformed into revenue and probably not so easy to communicate to investors. Its basically a platform that enables a new form of communication. Different people use it for different purposes. Companies use it for different purposes. Traditional media gets lots of their content from Twitter nowadays. Mimicking Facebook in any way would be a mistake because I think it's a fundamentally different product.
> This book was a huge disappointment. The authors try to draw parallels between the current high-tech/Internet phenomenon and previous "manias." However, their rational is very poor. As an example, they say the Internet Bubble will burst just like biotechnology did. What they fail to mention is that Internet usage and penetration has grown faster than anything in the history of mankind. Furthermore, Internet companies are posting revenues and mainly losing money because it is a market share game right now. Biotech companies, on the other hand, never had any revenue until they had a drug on the market. They only focus on the negatives and don't provide both sides of the story. This type of faulty reasoning is why I believe your money would be better spent on other Internet books.
We are right back to the "share game". Although profits are in a better place, and there do appear to be strong winners today, the companies making money (Google and Facebook) are doing so at the expense of companies who are losing money ta make market share, which makes the whole thing feel like a giant house of cards.
Which, while slightly off topic, reminds me: does Twitter do automated resume checking? I applied some time back at 3am for a job I was more than qualified for and got a rejection almost instantly. I thought maybe it was an automated system so I tweaked my resume and resubmitted and it was rejected again almost instantly.
Really put me off from ever trying again considering that I met the requirements listed and it declined me saying I did not. I had an indirect way to send a resume through some friends but decided not to bother after that.
So unless there's a burning reason that compels you to work there, maybe it's not a bad thing to look elsewhere.
Disclaimer: I have never applied to Twitter.
PS. Twitter apparently uses Jobvite [1]
[1] https://www.quora.com/Why-do-companies-pass-on-using-Jobvite
Free: current access $25/Year: Access using any 3rd party product $200/Year: Name verified $20,000/year: Corporate account etc