Dorsey snarks at Zuckerberg as investors run from Twitter following problem-ridden Q3

Profile picture for user slauchlan By Stuart Lauchlan October 25, 2019
Summary:
Twitter crashed on Wall Street after Q3 numbers spectacularly missed expectations.

Jack Dorsey

Timing is everything. As Twitter’s stock took a hit on the back of more problems and weak numbers for the social media platform, CEO Jack Dorsey chose the same day to start an attention-grabbing war of words with his counterpart over at Facebook.

Following Mark Zuckerberg’s controversial speech at Georgetown University last week and this week’s Congressional drubbing he received, Dorsey picked him up on his comments and Facebook’s policies around free speech.

Speaking at the Twitter News Summit, he argued there’s a “major gap and flaw” in what Zuckerberg is pitching:

We talk a lot about speech and expression and we don't talk about reach enough, and we don't talk about amplification. And reach and amplification was not represented in that speech.

Zuckerberg had not referenced the difference between content that goes viral naturally and paid-for promoted posts that go to bigger audiences, he complained:

It was a major gap and flaw in the substance he was getting across.

He accused Facebook of adopting a very US-centric approach to the idea of free speech, which he finds unhelpful:

A lot of it seemed to be based in American tradition. I fear that if we base too much in this one concept, we take away the ability to experiment and expand and evolve. I imagine a new tradition…has to be informed by the things that work. It also has to be informed by the things that aren’t working. And not just what’s working in America, but what’s working all over the world…We are not just serving an American audience, we are serving a global audience.

Dorsey also pointed to inconsistencies in Zuckerberg’s current story of how Facebook came to be founded. Whereas until now the backstory has been that it emerged from a fratboy app to compare how hot various students were, the Georgetown version has a more noble origin as a response to giving people a voice to protest the Gulf War:

There’s always some amount of revisionist history in all his storytelling. It takes away from the authenticity and the genuineness of what we’re trying to do and how we’re trying to explain ourselves.

Twitter tumbles 

Amusing though it might be to see social media CEOs squabbling, the rest of Dorsey’s day can hardly have been much fun as Twitter lost 20% of its market cap after a weak set of Q3 numbers. Revenues were $824 million, up 9% year-on-year, but falling short of analyst consensus expectations of $874 million. Profit of $37 million also missed spectacularly, with estimates being as high as $161 million.

There was some good news to be found in the shape of a 17% year-on-year increase in the monetizable daily active usage' (mDAU), but overall Dorsey was on the back foot when discussing the results with analysts:

Unfortunately, we had some missteps and bugs in our MAP ads, admits greater than expected seasonality in July and August. Despite that, we saw strong September results and good advertiser momentum.

The bugs reference relates to one mainly hit the legacy Mobile Application Promotion (MAP) product, impacting the ability to target ads and to a second one that impacted a number of personalization and data settings.

The party line on the slower rate business over the summer months was to attribute part of the blame to fewer big events to catch attention compared to last year, with the example cited being the difference between the mens’s World Cup last year and the female equivalent this year.

Dorsey insisted that the executive team is “rethinking the fundamentals of how Twitter works in order to better address the problems we’re seeing” and cited some proof points to back up his claim:

One example of this is our work on public conversation health. At the beginning of this year, we resolved to break from only acting on reports of abuse and harassment, to proactively identifying tweets and conduct that violates our terms of service. Today, we’ve crossed another threshold. Over half of the enforcement actions we take in any given week for violating our abuse rules is now proactively identified and verified by our agents before a victim or bystander has to report the violation.

We will continue to refine this work to steadily increase that percentage. This is important because it removes the burden of reporting from victims and paired with a much more robust appeals process increases our correctness of enforcement.

Another example of rethinking the fundamentals is where we have taken on some notable experiments this quarter, which might lead to far greater outcomes. In health, we launched the ability for folks to moderate replies to their tweets by hiding them from the main conversation view, while still allowing moderated tweets to be seen behind the button press.

The company is also working on ways to on-board new users more effectively, he said:

We do believe Twitter works best when people see it more as an interest network [and]  they're able to quickly find and follow their interest. Right now we do a lot of work to find and follow related accounts. So we have been both testing and  deploying tools around topics and interests to make it much easier to get into your interest faster without having to do all the work to find and follow those related accounts…So if you show up in the app or on the website expressing a particular interest like basketball or deep learning or cryptocurrency, you will find immediately a list or be able to pick from a topic that will give you a rich set of accounts and also tweets immediately into your timeline, which we think will help pretty dramatically.

He concluded with a 'long game' pitch:

We can meet the larger challenges facing us in our industry, including misleading information and then ever evolving regulatory environment. We’re approaching all these problems in a deeply principled way and commit to addressing them openly in a way that benefits all not just Twitter.

My take

The revenue miss is shockingly bad and it’s hardly surprising that investors took fright.  The daily user growth - the strongest in 2 years - is the comfort blanket to cling to, while Dorsey pointed to a supposed recovery in ad revenue to double digit growth in September. Whether that uptick means that a short term crisis is over remains to be seen.  But snarking at Zuckerberg has to have been the highlight of a bad day for Dorsey...