Yet Another Value Podcast - Elliot Turner on Twitter $TWTR

Episode Date: January 22, 2021

Elliot Turner of RGA (http://rgaia.com) makes a repeat appearance to provide a quick update on Dropbox (DBX), discuss how a due diligence project resulted in him hitting the state limit for wine delivery, and then dive deep into his investment in Twitter (TWTR).Elliot's first YAVP appearance: https://www.youtube.com/watch?v=NJddlF3__Nw&t=3sElliot's Twitter: https://twitter.com/ElliotTurnChapters:0:00 Intro1:15 The time Elliot hit the state limit for alcohol shipments3:00 Dropbox (DBX) update6:50 Has Dropbox's pandemic performance disappointed?10:15 Twitter (TWTR) overview10:40 Trump ban: good or bad for Twitter?14:10 Trump ban devil's advocate: engagement down18:35 Why Elliot flipped from Twitter bear to bull21:15 Twitter's failed sports rights attempts25:15 Twitter's substack opportunity30:55 Mismanagement bear case35:30 How Twitter captures some of their consumer surplus36:50 Valuation40:30 Should Twitter charge for verification?44:00 What does Twitter look like in a few years?46:55 How Twitter gets to 500m DAUs55:20 What to expect from Twitter's analyst day59:50 Financial metrics to expect from Twitter's analyst day

All right, hello, and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have a repeat guest, my friend, Elliot Turner. Elliot is a managing director at RGA. Elliot, how's it going? Going great. How are you, Andrew? Doing good, man. Well, let me just start the pod the way I do every pod, and that's by pitching you, my guest. You know, people can go listen to the first pod for a longer pitch. But, you know, for this pitch, I think I've publicly said, like, maybe I've really enjoyed doing the podcast and maybe my biggest regret. is I had you on the second podcast and I kind of hadn't figured out the pacing. I think I had a little bit of a smaller audience. We had some technical issues. And I just thought like it was a great conversation that was kind of undone by some external factors. So I'm just really excited to have you on again and take a second shot at this. Yeah, I'm excited to be back. I think, you know, I really like

these conversations where you've done a lot of work. You're really thoughtful about the names we get into. So it's different than the typical podcast. Like I love getting into the weeds with someone as knowledgeable and thoughtful as yourself. So, you know, it's great to be back. Hey, I'm excited to hear that. And I will tell you the company we're going to talk today, Twitter is a company. I've got a lot of thoughts on. So I'm really excited to dive into that. But before we do that, just two things I want to talk to you about. So the first is you had a story over kind of the fall that you were doing due diligence on a company and you hit the state regulations on alcohol shipments. Was that really due diligence, do you intervention, and what was going on over there?

Well, let's call it equal parts due diligence and customer acquisition on behalf of the company because I was very generous with the bottles I was buying. Our state, Connecticut, enforces a one case per month that you're allowed to buy a wine. So that gives you some context. And actually, they make it as two cases over 62 days. So I was budding against that limit. we call it wine jail when we can't buy anymore. But, you know, every once in a while, you find a hidden gem, want to stash some away, share it with your friends, and, you know, make sure that you learn a little bit about the company along the way. It's been a fun one to work on. I bet. And it seems like the due diligence has paid off because I think it was a so far quite successful investment. Am I wrong on that? Yeah, so far quite good, except I really expect a whole lot more. I think it's one that I'd be happy to own for many, many years to really see through. I think if the opportunity, you know, naked wines, if it existed in venture land, they'd do upround and no one would anchor

to where price was. They'd be like, okay, this is worth so-and-so on an absolute basis. But like right now, the way people are approaching the market, the fact that their opportunities in the U.S., predominantly in the U.S., and they're a UK-listed company, I think they're just one of those undiscovered gems that's lurking out there for all us who like turning over a lot of rocks. And you did a margin, a global ideas presentation on them a couple of days. days ago, right? Daniel of ideas. Yeah, just yesterday afternoon. So really excited to get that out there. I will be sure to link that in the show notes so that not to plug another podcast, but anybody who wants to go hear a little bit more on that opportunity or just go due diligence,

some wine can check that out. Second thing I want to talk to you about, first podcast was on Dropbox. Just maybe we could do a quick update on that. I think the stock's probably been basically flat since we talked about that. I've got some upsides and negatives, but I think the biggest change since we talked is there was a head count reduction announced last week, 10% of the company getting terminated, CO is leaving. How do you think about that head count reduction? Yeah, so the head count reduction is like very concentrated in support areas for a in-office presence. So you could think about like the cooking staff that they had. They were overly generous with the food services they offered on premises. You could think about the

secretarial needs that you'd have in an office that don't necessarily exist. outside an office. So at least half of the headcount reduction was concentrated on having to support an on-prem office environment now that they've gone like full virtual with a partial office presence. The rest is, you know, I think they've prided themselves on being a very engineering-driven culture and sales was kind of like secondary to engineering. The business is matured and it's in a very different state than when they were younger. And I think it was time to make to get rid of certain redundancies, like there were some product development functions that coexisted or were really duplicative between the engineering and the sales side of things.

And so I think, you know, it makes sense to streamline. You know, I think the market had a lot of concerns that the fact they were putting this out there meant that perhaps they were missing their expected trajectory during the fourth quarter. I think that's pretty unlikely. I think they would have warned on the fourth quarter alongside that, were that the case? They have great visibility. You know, they put out that guidance halfway through the quarter. And, you know, one of the other things is, Tim, the CFO, when they were doing their Q3 earnings call,

mentioned many times that they have several different levers to approach, to pull in order to approach their billion dollar four-year-out free cash flow target. And, you know, obviously he didn't want to put it out there then, but this was clearly one of the levers that he was contemplating. They had a lot of room to ring out more upside on market. So I think that's helpful. Obviously, Olivia Natham leaving within a year of having become C.O. is a pretty, you know, it's not ideal, right? You have another situation where a high-up C-suite executive is, you know, kind of a revolving door. That's been one of the critiques about the company. I think a lot of that has to do with how they made Tim Young, the C. I agree. gave him controls over product. And so, you know, I really think it's about how they're reorganizing

at the top. I think it's a little bit like the old G model, right? Like you have two people fighting to be the successor or whatever. And when one of them comes out victorious, the loser leaves, right? Like if you were going for the CEO job and they say, hey, you can be the number two or three at the company. You generally leave and go find a new company to be the number, you know, the number 1.5 or 1 at. Just last thing on Dropbox. So that's kind of the show. short term. And I completely agree with your take. I thought everyone was worried about a 10% reduction. They said right in there, right? A lot of it is were permanent work from home. They're cutting out a lot of support stuff. Just one more on Dropbox. So, you know, I think

when we did the last call, it was around August. And when I think about last year for Dropbox, I can't think of a better environment, right? Like, they offer a product that helps you work from home. And I do think, maybe this is just me, but I have been a little disappointed by, you know, I think they say we're a long-term 10% grower or something as kind of the target. And in 2020, they're going to grow about 15%, maybe a little bit aided by the Hello Sign acquisition. You know, so it just seems weird in the best environment for them that I think you could possibly draw up.

They're barely growing above their long-term target. So I've just been a little disappointed. I know the business model's a little bit slower giving the, you know, kind of bring someone in for a free acquisition and get them to pay. But just a little disappointed. Do you feel differently or how do you think about that? Yeah, I mean, obviously I'd like a little more out of it, but I think that's one of the elements that I like about the setup.

They could fall a little short of what I'd hope for on that front. And yet it still works. There's still a lot of ways to make the numbers work. It's still actually, you know, the people who use it are more appreciative than otherwise. Work from home is a great tailwind, but they have a headwind in so far as they cater predominantly to SMBs. And so if you look at where the eco-exambs, and so if you look at where the economic hurt has lied. Smbs have taken, you know, far more the brunt of it. And interestingly, you know, there are companies that I'd compare them to insofar as how they're positioned to benefit

from work from home. And some of these other companies have had similarly like kind of headwinds, similar headwinds to the revenue trajectory, but the market's treating them much kinder. And for some reason, Dropbox isn't getting swept up in that enthusiasm. I think partly because so early in this environment, you know, it didn't really experience the pain of the March sell-off. And it was a place where some people could hide thinking that, oh, perhaps we get this like dramatic acceleration. And so, you know, and dramatic acceleration doesn't happen. And those people who are hiding there for hopes are kind of faster money and they got to turn out of their positions. But by and large, you know, I think it's in a pretty good spot. It's not, the environment certainly hasn't gotten

of worse for them. And I think, you know, there are definitely some opportunities that they could, you know, you mentioned hello sign, right? I don't think it's helped that much on the revenue line yet. It's still relatively small. It's definitely a good contributor to growth. I expect it to be an even better one. And I really think that one of the big things it could do is it could drive churn down, get NRR above 100 in the business side of things and the teams, you know, depending on how you define it, I think broader than teams would be appropriate on the business side of things. And if that happens, when that happens, and they could show that and illustrate it clearly to the street, I think you get a much better story and a much better setup to buy against. So hopefully they've used this opportunity of recent weakness to kind of like, recent weakness being at the end of the quarter to like truly plow through some of that share repurchase, really start proving that they could cannibalize their shares as opposed to just offset SBC and, you know, take advantage of kind of going work from home.

themselves and optimize their own margin structure. And just so you can update your model, since our last conversation, I became a paid user. And I absolutely love it. I can't believe I wasn't using it before. Like we had an internal system. It's just, as you said, the MPS, it's so much simpler and easier to just pull everything off. I like it better than Google Drive.

I've really enjoyed it. I will say I like the password product, but it sometimes doesn't work for me, which is a little frustrating. But I just wanted you to update your number for one more user. Yeah. Anything else on Dropbox? Are you ready to turn to Twitter? I'm ready for Twitter. Well, Twitter, you know, it's the stock I've been thinking about, I'd say the most so far, the large cap stock I've been thinking about so far the most. You know, the stock is down 12% so far this year versus the S&Ps up slightly. I think, you know, everyone's focused on the Trump

ban and everything. So we can go anywhere you want with it, but why don't you start? What's your all thoughts on Twitter? I'm sure we'll hit the Trump ban on some point. Sure, yeah. I might as well start with that. Right? Because like at the end of the day, it's really what's driven the stock in the near term. And I think there's a huge misunderstanding about the impact that Trump had on the platform on in all respects. In a lot of ways, Trump backed Twitter into a corner. No matter what they did, they could not win because there are huge cohorts of people who felt they were a little too reluctant to. actually enforce their terms of service on Trump because he was president. And there were a lot of people who were angry and not engaging on the platform who otherwise would have been far more willing to engage on the platform. And they were quite vocal. And on the other hand, you had a pretty loud, but I think smaller cohort who felt that he's the president. He's an

important figure. And he should be able to say and do whatever he so pleases. And that anything that gets in the way, any friction, let alone outright, like, removal of tweets, any friction, including those little notes on the bottom saying this is, you know, something that's not true or threatens election integrity, was viewed as censorship and really problematic. So no matter what they did, whether they did something or didn't do something, there was going to be a lot of people who are really angry. And so that's a challenging position to be in. And, you know, they, I think, exercised appropriate restraint in not removing him, despite protestations, not just from active users, but the advertising community at large. And you can see just, you know, three days

after the Trump ban ended, Unilever is like, okay, we're finally ready to advertise on your platform again. They're one of the largest brand advertisers in the world. Think of the pain that Twitter took in not enforcing things sooner. Like people say that they let Trump engage because it was good for business. It was actually terrible for business. When you want to think about revenue drivers, right? And I think this is the segue in how the business works. When you think about revenue drivers for the company, like every single one of us uses our forecast of MDOWs, so like the daily active users who are monetizable. And we multiply that by our expectation of ARPU. Right. And the problem is both those are actually, you know, they're outputs. They're not inputs. There are a lot of factors that influence

where each of those are going to go. And if you want to know ARPU and if you want to know how much revenue they're going to make, better information would be how many advertisers are advertising on the platform and how much budget each advertiser is committing to the platform. And then if you really want to know where those two factors are going that drive the revenue side of things, what you would want to know is what sort of ROI advertisers are getting on their ad spend on the platform, right? So like, you know, ARPU is really an output and we're using that as an input, but the fact of the

matter is, there are a whole lot of advertisers who not only didn't, some who outright didn't advertise on Twitter because they didn't like the presence of Trump on there. But there were a lot who committed way less budget because they didn't want to have their copy go against really controversial content. This is that you gave me. So I'm giving you your words back. But I believe the number one thing that advertisers wouldn't advertise against on Twitter was coronavirus for very obvious reasons. And then the number two thing was Trump. Tell me if I'm wrong because I got this from you, but you're right. You're right. So let me play devil's advocate here. So what you're saying is, hey, Arpoo can go up because, you know, Unilever, other advertisers who didn't want to advertise

against, you know, Trump and Trump-like content, they're comfortable returning to the platform. Wouldn't the pushback be, I think it would come in two forms. A, Trump was an engagement machine for driving people, users, you know, if you had any interest in politics, you had. to be on Twitter because you had to follow Donald Trump. And, you know, he spurred tons of engagement. Every tweet he did, 100,000 likes, 50,000 retweets, comment, comment, comment, comment. So number one would be, hey, engagement goes way down. And number two would be, you know, I think this has been disproven multiple times. That number two would be, hey, the users who don't like this censorship and free speech, they're going to move over to another platform. And, you know, we saw this over the summer where

Trump said, I'd love to leave Twitter. I'm going to parlor and he never did. So I think that's number two, which is lighter, but those are the two bare cases, and I'll let you respond there. Sure, yeah, yeah. I'll hit both because, I mean, on the first front, like engagement, when people are in a state of anger, and that's what Trump tended to do, whether it were the people who are angry at his tweets or the people who are angry at the responses, the angry responses to his tweets, when you put people in a state of rage and fury, those people are not amenable to advertising, no matter what. So it's not just about the controversy of it all. It's that advertisers want to

hit people with ads when they're most amenable to being influenced. And like, you know what happens when you get angry about something. Like when you see people in politics on Twitter, what's the first rule of engaging with people on politics about Twitter? You're never going to change anyone's mind, right? You're shouting into the well. So just the fact that you know you can't change anyone's mind in that state when they go into that state, why would you even want to try to advertise and influence them in that state. So I think that engagement wasn't worth very much. And the fact of the matter is many of these tweets like created their own events, but for the most part, a lot of it was around real events that mattered in the world, irrespective of who was president. And so whenever

anything happens, people turn to Twitter. People engage on Twitter. You see that yesterday. Engagement was through the roof. Yesterday being inauguration day. Engagement was through the roof. There are all kinds of people on the platform saying whatever the hell they wanted to say. And so, you know, I mean, I think we're going to lose far less engagement than people imagine because, you know, it's the world and life around us that get us to engage. And they're going to get people in a much cleaner, better state than they otherwise would be. Now, this argument about, you know, some of the people who are annoyed about censorship or the outright ban are going to move to other platforms. I mean, it's kind of funny to me that, you know, this would be any, I've heard that argument.

how many times over the last few years, any time that anything's happened? I mean, you would think that if these people were going to move, they would have moved. It's the round holiday day argument. Every six months, it pops up again. Yeah, exactly. But you know what the fact of the matter is, first of all, who wants to engage in a platform where it's just one side of the political echo chamber and it's only politics? Like, you know, what percent of Twitter engages on politics? So much of it is about, I don't know, sports Twitter is huge, right? If you love sports and you want to engage with the athletes you're really passionate about that you really respect and love, it's not going to happen on a platform that's built for

free speech, aka, I could say, you know, really unsavory things there, right? That's not where, like, people want to engage with, like, their favorite musicians or, you know, like scientists who are studying COVID exchanging, like, pre-peer-reviewed research in real time. Like that sort of stuff, the network effects already there. You can't leave Twitter. You're not going to displace that. And I remember, I think it was like 2012, somewhere around there where this platform, Elo, was like suddenly really popular and really hot. And a lot of people were like, oh, Elo is going to quit, going to kill Twitter. Because what Elo did was very similar to Twitter, though they let you write longer thoughts. And it's like, that didn't even work. Who, I,

I guarantee you, most of you out there haven't even heard of L.O. Because you probably weren't even on Twitter at the time when L.O. became a thing. So, you know, it's not really that big of a deal to me. So I think that's a great discussion of the Trump case. So let's dive into the bear case a little further. And one of the things I like about you is I think you used to be a Twitter bear and now you're a Twitter bowl. So I think you've really thought this thing through.

And as a side note, I think sometimes the products that you're, the companies that you start bearish on and you're bearish for like several years. and then switch switch flips and you flip bullish i think those can be the best investments because you've really thought them through and you've really had like a eureka moment i don't know if you feel the same way 100% yeah no there were two things that kept me from liking twitter in the early days one is valuation i'm a valuation sensitive investor right i'm like i as much as i could like the quality of a given company i mean i'm going to have a price that i triangulate with my tools and that I won't pay, you know, above a certain level. Obviously, you know, a level could have a degree

of range to it, but, you know, valuation really matters when Twitter IPO, it was extremely expensive. But the second thing, and the factor that, you know, what you referenced, what made me pull a 180 is I felt it was obvious that Twitter didn't even know what they were. Like Twitter at first was like, you know, think about us vis-a-vis Facebook. They define themselves, their entire essence vis-a-vis Facebook. They had this little period where they talked about like Twitter is what's live. Like, nah. I mean, obviously live stuff's really important on Twitter. A lot of live stuff. I was just talking about events transpire on Twitter. But live is the wrong phrasing. That's one facet of it. What makes live interesting is Twitter is about interest, right? Twitter is about

being passionate about something and engaging in your interests and immersing in a community around those interests. And, you know, it's treated in different ways in different companies in different countries. For example, in Japan, if you want to engage in various interests, you'd have a different handle for each of those interests and you'd engage accordingly. Here, I mean, I'll talk about, you know, hockey, baseball, and mostly finance, but still the other stuff. Sorry, if you follow me, you're going to have to deal with the other stuff because that's, you know, how I am. It's me. It's a reflection of what I'm interested in. So you're along for the ride. But I think, you know, once Twitter brought Jack Dorsey back and defined itself around interests, that's when I really got

bullish. I don't think you could exist, not knowing what you are. One of my favorite things is Tretaquery, Ben Thompson. He's got this Trichore account. And then he has not Tech Ben or something where he only tweets like religiously about the Milwaukee Bucks, if I remember. So I hear you on the Japan thing. What about just you mentioned live for a second. So a couple of years ago, Twitter, I believe they had the streaming rights to Thursday night football for one year and then they they experimented with uh you know i think they got some baseball rights and all this type of stuff for a while i think they had an NBA stream where you could they'd only show one camera so it would be like a camera focused only on one player for the whole game which is kind of different but you know nothing really

came with that and i think they've kind of started to sweep that away i actually was kind of excited by that like you know we can talk acquisitions later as well but disney almost bought twitter for a while and i did think like the synergies between ESPN airing something and having like a twitter real integration where you could comment on it and go back and forth with people. I thought that was interesting, but it doesn't seem like it's the future. Am I missing something? Do you think that's the right strategy, not kind of pursuing that a little further?

I think they should have pursued it in a far more twittery way. And I do feel like they've missed some opportunities. And I'll give you an example of what I think of as a twittery way. So I'm a big fish fan. So that's one of the other genres. And I'm not talking about like cast and real fish. I'm talking about the band fish. And so Trey Anastasio from Fish, he's the guitarist, lead singer, did this residency at Beacon

where for, I think it was eight consecutive Friday nights, he played a concert. And he did that through Twitch. And now Fish had been experimenting with Twitter in various ways. Fish live streams couch tour. Hashtag couch tour is a big thing on Twitter during Fish. tours where they broadcast these concerts live and what they did as their own lead gen and to give fans who weren't ready, willing, and able to pay for the concerts, the first song of their concerts in some of their summer tours was broadcast live on Twitter slash Periscope

and there were ways to engage it there. But when Trey did his streamed Friday night concerts, ideally Twitter should have been his first thought, but he did it on Twitch. And it's because Twitch had built a better platform for hosting it and making engagement around it and for he was raising money for charities and, you know, natively embedded in Twitch was a capability to give money to the various charities that he was trying to raise money for. Twitter just didn't have the assets in place to be able to handle. And one of the big pieces that they didn't have in place, like Twitch gives the creator an actual profile page that's customizable, that they could put their favorite pieces on, that they could have their own live window that you offer visibility into. And so I

really do think, you know, that would have been a much more twittery way to approach a live kind of situation than buying Thursday night football. Then I thought the NBA experiment was really smart because like NBA Twitter is a really big vertical within engagement is really good in that community. And I think it was a unique perspective. Like Thursday night football is what could get elsewhere. So they're competing with other channels. The MBA experiment was just what you could experience on Twitter. So it was really unique. It was something different. There was engagement around it. I expect to see more of that. And I think it's smart. I think it's good experimenting. I think it helps the NBA. And I think it helps Twitter alike.

But I think really, you know, they're focused on big brands. I think they should be thinking a lot more about creative empowerment, what they could do for some of the different kinds of creative on Twitter, how to empower them, give them opportunities to not just make more money. I think that's part of it, but to express themselves a little more on the platform in their own way. Yeah, so we'll go back to the bear case, which is where we started this, but let's talk about empowering that. Like, I think one of the big bull cases for Twitter has been, hey, you know, I have a substack or a premium service. Every substack and premium service, the funnel is Twitter, right? Like Matthew Iglesias, I think he started one with, he's like a substack, you know, partner at this

point of some form, but he was like, hey, my funnel is Twitter. Like my Twitter comes off people and then I monetize on substack. So I don't know what substacks valued at or how much money people are, but I guarantee you hundreds of millions are flowing through substack, right? And all of that is coming. The start comes for Twitter and Twitter's getting absolutely no value for that. Or, you know, I think back to my last podcast, Jeremy Raper comes on and he says, hey, I just did a tweet and I said, I'm looking for $400 million for a special situation I think can triple, right? If he does that, he's going to make a billion dollars in profit. He's going to have done it all on Twitter, but Twitter will get no value. Now, that's a

unique case with a really big number and everything. But you know, like, I think when Bulls look at this, they say, hey, there's all this value that's getting created on it, substack, the Jeremy a ton of other things. And Twitter's not capturing any of that. So how do you think they can go and pursue that? Obviously, that's part of the Bull and the Bear case there. But how do you think they eventually pursue that? Yeah, I think, you know, with another Twitter ball, we always call the platform the funnel for anything good and interesting in life. Yep. Yep. You know, we wouldn't have met had it not been for Twitter. So, and in fact, we haven't met in person yet because this crazy world. But yeah, but yeah, we spent some time in each

other's living rooms, basically, you know, hanging out virtually. Wouldn't have met had a not been for Twitter. And so many serendipitous things happened because of the platform. And a lot of people use it specifically with intent to drive their own funnel, top all the way through conversion, right? However you want to speak about it, I think part of it is that Twitter didn't have the foundational elements in place to start pursuing some of the opportunities they have to kind of capitalize on this. Part of it is they didn't have the vision to see where some of the stuff was going. I think substack's proven something that a lot of people didn't necessarily know existed and all the power to substack for having done that, but Twitter should

really be creating, I think, a layered subscription type opportunity. And I think it could be multifaceted. I think part of it's a premium feed, part of it's a newsletter. A lot of it's building data panels and customized profiles that the creatives could use and, you know, taking a take rate of subscriptions. I think substacks asking a little much from some of their larger creators, 10% plus payment processing fee. Like that's, that's hefty. I think for smaller creatives, that's fine, but I think some of the bigger creatives could start moving off the platform and piecing together the various pieces at a much lower overall cost. But at the end of the day, the funnel is Twitter. And one of the unique opportunities Twitter could have, whether it's fulfilling for

substack or it's for themselves, just imagine like a one click subscribe. And imagine, you know, like, so you could send out a tweet saying subscribe to my substack. And with one click, I could subscribe because Twitter has my payment credentials already. How amazing would that be? And then, you know, not only could it be a tweet from you, but it could be an ad copy where you could promote that tweet to try to raise awareness and get people who are potentially interested to click with one click, right? You know, that's the kind of stuff where it's synergistic with creating an ad format.

And I think Twitter's had this reservation that they don't want to take any of the conversation off Twitter. They don't want to promote it. But there's an arrogance to that in not acknowledging that a lot of the conversation starts, continues on Twitter, and comes back to Twitter thereafter, but there's a place for other forms of communication amongst in between followed and follow we on Twitter. So, you know, that arrogance, I think they have to tuck that aside

and start getting a little more experimental with some of the ways they could really, like, you know, engage and empower their creatives. Like, you know, it's kind of ironic to me that Jack on the square call would talk about how successful the cash app integration is on Spotify and Twitch, and yet they don't have anything of that sort on Twitter. And I know for my conversations with IR that at least they had like an internal hackathon and a tipping add-on, one internally as a product. I think part of that is like one of the things I don't think they've communicated well enough is they had to do so much foundational work on the back end in order to actually be able to get to a point where

they can build some of this product. And, you know, one of the signs to me that the development velocity is about to really accelerate, it's not just the, you know, entire rebuild of the ad tech stack that was kind of completed at the end of Q2. It's also, I think not enough was read into their recent announcement that they're building on AWS. And I think it's, took some foundational works several years ago. You could find articles that talk about their platform migration from Mesos to Kubernetes. I think that was step one. And in Q1 of 2020, was the first time they disclosed that they actually relied on infrastructure

as a service companies in their cogs. First time that you actually see that. And now more recently, this announcement that they're using AWS, I think they could get away from using some of their own servers and they could just develop much, much faster. And so, you know, if I don't see some of these things come through, you know, like one of the, one of the, when you ask, like, what are some questions you should ask me on Twitter? One of the questions would make me more bearish. If I don't see the development velocity from here, kind of like deliver on what I've expected, that's something that would definitely be concerning to me. There would be something wrong if we don't see things like they've already started moving faster, but to continue to get faster from here.

Perfect. So let's talk a little bit more about concerning things. So you said earlier, you're still evaluation-focused investor, right? So I think a big bear case would be, hey, this thing has been mismanaged. You know, was it, was it Mark Zuckerberg who said this is the clown car that ran into the gold mine? Yeah. This thing has always been mismanaged. I think like over the summer, the way they handled the Trump, when they started slapping the warning labels on Trump, I actually think that was pretty poorly managed. And that's just one example of a lot of mismanagement, right? Obviously, they had to rebuild their tax. But I think,

you'd say, hey, there's mismanagement. This is a product, this is one of those products where just the consumer surplus permit is always going to far outweigh the impact on it. You know, I think even 50 years back, like the big three broadcast networks, yeah, they made a ton of money, but the money they made versus the fact that they drove all of politics and all of culture in America was very small, right? So I think those are two things. And then the third thing is, hey, this isn't exactly cheap, right?

Like, even today, this is 10 times revenue. you're paying about $180 per daily active user. And, you know, 70, 80% of those daily active users are outside the U.S., which is probably worth less than a user inside the U.S. So I think those are the three bear case theses. How would you kind of respond to those? Yeah, okay. So on number one, I mean, I think we've seen the bear case, right?

They were horribly managed for a long time. And now you have two activists overseeing the process. Fantastic activists. And you have a, I'd say, completely re-orchestrated board from where things were exactly last year at this time. So not, I think, you know, not enough attention was paid to the fact that not only were Silver Lake and Elliott brought on to the board, and I've kind of called them the good cop, bad cop set up because Silver Lake really great prowess and how to monetize emergent technologies, while Elliott is like, you know, they're going to

impose some discipline on the organization and they're, you know, good cop, bad cop at the end of the day are on the same side as one another, right? They're not really, the good cop isn't really on the side of the person they're working against. So I think that's really important. But not enough attention was paid to Patrick Pichette, Google's former CFO, who really was a key figure in helping Google make more money off of their presence, is now the independent chairman. Omid Kortostani's gone. So I think, you know, like he's a really great figure to have overseeing everything. And one of the key signs to me that something was meaningfully different was Jack Dorsey accidentally started a periscope, an internal periscope, to his public platform.

Sometime, I think it was like June. And he was telling his team, like, yeah, the board is far more engaged now. And it was like, oh, oops, this is live. And he shut it off. Yeah, the board is really engaged. And you have a really good board. And so I think if you start seeing mismanagement, you know, I, I, I, I think they will act fast to make sure the right management steps are taken.

And I should point out, like, I am a vocal supporter of Jack. I really think he's the right person for the job. He's got divided attention, yes. I don't think that's the biggest problem. He's a decentralized thinker and manager. Like, he wants people who are really good in their respective domains to have a lot of power. And he empowers them. And he'll take the blame himself when things go right.

wrong. And I think that's part of why a lot of people view him too negatively, but he could really badly use a good COO. Like even good companies and good leaders, like I saw last week, Jeff Green of Trade Desk hired a COO. It's like if Jeff Green could use a good COO, Jack Dorsey, while he's working at Square as well, could use a really good COO, someone who could just get shit done at the end of the day. Like, that's something I'd really like to see change. I think of Elon Musk with SpaceX, you know, like SpaceX, I'm sure it's his vision. I know a lot of people's miles very on Elon Musk, but the COO over there is like the driving force. And, you know, Elon's visit. But I agree with you, especially if you're a founder, CEO who's dividing time

between multiple companies. And how crazy is it that these guys like Jack Square and Twitter, Elon, you know, SpaceX and Tesla and four others? Like, it's crazy. But if you've got divided attention especially, you need a CEO who's just going to make sure operationally, everything is perfectly in order. I completely agree with you on that. Yeah. So that's where I stand. It's definitely one of the changes I'd love to see made. So that's the management. I think that addresses management. The other two bear cases I'd love to talk to you about is we talked about consumer surplus. This is always just going to have way more consumer surplus and the valuation. So wherever you want to jump off there and we can go to the other one after. Yeah. So consumer surplus is the fact of the matter is I think they have plenty of levers to pull to try to make more money and put themselves in a position. You know, the stuff we were talking about creating subscription. like services, of creating ad copy to feed into those subscription-like services.

There are certain kinds of encounters where, like, obviously, you and I meeting is consumer surplus on Twitter platform, but there's no way they could wedge themselves into that situation. That's fine, but that's part of building a network effect and having multiple purposes so that people don't ever churn off the platform. Like, you know, I've been using Twitter now for, I passed my 10-year anniversary on Twitter. I don't expect to churn anytime soon, right? So you're building really long customer lifespans by having this surplus exist, and it gives you a lot more options of different areas that they could pursue,

different ways they could get more value, build more value for me. So I think it's great to create a lot of surplus. You don't want to capture it all because if you do that, I think people start thinking of the platform a little differently too. You know, it's all about serendipity and it's all about having a good business that they could build on top of it. And it's hard not to tie that into valuation. I think a lot of what people miss is that they do make good money per user, right? They're daily active users.

In 2019, they were making about $25 a user. When you think about what, you said it's like $280. Did you say $180 or $2.80? Yeah, 180 a user. I mean, what you're expecting is the average person to stay on the platform then for like, you know, eight years. and then that's accretive to the valuation, right, on a per user basis if you don't ever grow again. I think that's reasonable, right?

Like I was saying, I've been on it for 10 years. When you really start getting a lot of value out of the platform, when you do have a lot of consumer surplus, you're going to have a really long customer lifespan. It's going to be really hard for someone to put a wedge in there and drive you away. So, you know, I think there's like a symbiosis between the two that I think a lot of. people ignore. And I think that valuation is eminently reasonable because, you know, for the,

for the most part, I think the platform's undermonetized. I think they should be making a lot more money on a per user basis. I think they have a big opportunity to go from like, really, when you think about Twitter today, they're just a top of funnel, brand based advertising platform with a tiny data business on top of it. And they have a huge data asset that I think down the line. There are going to be opportunities for them to like right now that effectively they sell a fire hose. They could start packaging and selling insights on that data, right? That's something that I think they could do where they don't get in the way of the consumer ability to build surplus on the platform. I think they could really move down the funnel. The illustrative

example that Ned gave, I can't remember if it was on the Q3 call or at Barclays thereafter about Disney engaging on the platform on the launch of D-plus and Mandalorian using everything from like buying the top of the trending screen on your mobile, to having tweets where you could sign up for notifications for when Mandeloreans launched, to actual just like brand building copy that they pushed out there, and to a branded like button, right? All these things are different ways where they could get a little closer to your specific intent and leverage more of the potential they have as a platform for brand. You know, those are. unique opportunities. The branded like button is something that I think is really interesting. I think

it makes a lot of sense. It's still largely in beta. I was trying to talk to IR about how they price it, but it's the kind of thing where it takes some development, unique development for each instance of it. And so it takes some resource from Twitter, but they could price that, I think, pretty aggressively. It's something unique if they use it smartly. You know, just to throw one other example, like you and I have about $10,000, right? So we're not huge, but we're obviously not small Twitter users. I don't think either of us would do this, but I think like one of my favorite accounts is we rate dogs. I just find them so funny. I don't know if you've ever seen that. But, you know, they've got two million dollars. And once every

other month, they'll do a sponsored post by Disney's releasing a dog movie. And it's a sponsored post by the Disney dog movie. They're probably too big. But like for you and I, Twitter could have a match a brand with a user thing where, you know, probably Coke's not going to have a sponsor. but I'm sure like some fly-by-night clothing store would pay us $5 to tweet out to their to tweet out to all of our followers, hey, love this brand of shorts or something, you know? And I do think there's like little things like that where they can be able to marketplace for kind of the smaller end users that they don't have, but that is that is pure upside. And that's just one example off the top of my head.

But I'm sure you can think, oh, here's another one. Have you heard, I know a lot of people think anyone with a blue check mark. Blue check mark is, you know, that is huge on Twitter. why doesn't Twitter charge $25 per month for a blue checkmark? If they did that, that'd be 100 million and basically 100% revenue. What would you think about that idea? Yeah, I'm a little torn on that. I mean, I like the idea of expanding their verification platform. I think that's one of the notable areas that they've said they're making a lot of progress on finally. I think a lot of people wanted something done sooner on that. But it's really important to be thoughtful about how

they approach that. The problem was that in 2015 and 2016, there were certain controversial figures who people, users of Twitter, presumed the verification to mean some sort of validation from the platform that these people were serious and should be taken seriously. So I think it's important that they don't end up in that same situation again, though I think it should be tied more to identity than prominence in that sense. And, you know, One of the things I'm very protective of, I think some of the best accounts on all of Twitter are anonymous accounts. And, you know, I've seen some people suggest they should do away with that. They absolutely should not.

That would be something that would make me incredibly, like, negative incrementally on the platform. But they also should reward identity because there are benefits to having real identity out there. And one thing I should have said with the subscription, the one button thing, I think Twitter should do whatever it takes to get people to put their credit card information on the platform. And I think people don't realize that it's not just about like native embedded commerce. It's one of the things I've really learned being involved in Roku over time. When you have someone's payment information, you have their real identity and you could mesh data sets like second and third party data sets to get a much cleaner picture of exactly what that person likes.

And so having payment credentials translates directly into much better targeted advertising. And you don't have to rely on IDFA. You don't have to rely nearly as much on like cookies or other sources of information. You can leverage the credit card in order to really know the person a lot better. So anything they could do to get people to put their credit card information into the platform. And holy shit, I know a company that actually handles payment stuff that they might be able to work with in some capacity. Whatever they could do to go down that route, I think would be extremely beneficial. for the advertising business. So like anything like that would be, would be amazing.

That's really interesting because when I think of credit card, I really only think of the optionality of getting, you know, basically getting a cut of people putting stuff on buying an e-commerce opportunity and all that. But it's really interesting to hear them, think about just that credit card has access to data. Let's see. Okay, so I think we've talked about, so we talked a little bit about valuation here, right? You said, hey, 10 times revenue 180 time, $180 per daily active user. In your mind, it's not that expensive given, you know, basically the optionality here, right? They're under monetizing. So it's not the trillion. So let's talk, you know, one of the big things I've had an issue with and I'm trying to

evolve on is, you know, when you look at something, you say, oh, it's 30 times price of earnings on a trailing basis. Get over that that's not expensive because it's two times price earnings on a five-year-out basis. So if you and I went five years out and, you know, we threw out the super crazy bull cases and stuff, but what is your, where do you see? Twitter five years from now. What do the financials look like? What does the stock price look like? Yeah, well, first things first, I think there's a big opportunity just two years out and where the expectations are and where there could be. If they get back to 2019 Arpoo levels, which were like they had already deprecated map in the fourth quarter, and so it wasn't exactly

a barn burner year. If they get back to 2019 levels of Arpoo, if they continue growing the subscriber, sorry, the user base at the same sequential rate they had been doing heading in into COVID. So that's six million per quarter incremental users. Yep. And you trace that out to 2022, slap on their low end margin framework. So the 35 percent, sorry, 40 to 45 percent. You slap on the 40 percent. They're at two billion dollars in the EBITDA. The street's at $1.6 billion. So, I mean, I don't think you have to go even out five years to see that there's a huge gap between the expectation of where things can go and what they could liver on without truly capitalizing on some of the incremental opportunity, right? So I think first

things first. But then if you trace this out, like go over the course of five years, things could get really, really interesting. I mean, this could be the kind of platform. It really depends on how you see layered on product opportunities going. I could see a path five years out to them making like, you know, call it $12 billion in revenue and spitting off, you know, well upwards, something like, you know, $4 billion plus in EBITDA without even getting to their low-end margin framework. And so, you know, God, no one's thinking that they could deliver on anything remotely in that ballpark. And really, you know, when you think about that, it doesn't take that much. So where I'm coming, where I put these numbers out, they have to get,

sell model over there. Exactly. I got a, I got to look. This stuff's not a, some of it lives up there, but not all of it. I hear you. I hear you. Um, you know, they have to get to somewhere in the ballpark of 500 million MDAO, so that's definitely decently above where they are today, like they're flirting with 200. That's a three X on their current monthly. Uh, let you call it a two and a half X. Yeah. Two and a half X over five years. Um, and they have to be able to get, uh, I, I don't think I'm being very aggressive here with Arpoo. The consolidated Arpoo that I'm working with on this, let's see, let me pull this up, you know, is $26.5. So they, again, they were at 25 bucks in 2019, right? I'm cagering Arpoo at like 2% here. You know, probably if I were to phrase this

in betting terms, I bet the over on the Arpoo. and I'd maybe bet the under on the users, like that could be a little more challenging. Let me ask you about the users. So right now, 180 million active users, 35 million. 196 last queue. 196 daily active users. I think it's 35, 40 million in the U.S. You know, 35 to 40 million in the U.S. surprises me.

Netflix has 100 million paying accounts or something in the U.S. alone, if I remember correctly. You know, like I'm surprised Twitter is so low on, and I get it's daily active users, not monthly active users, but I'm surprised it's so low. for a platform that I feel like everyone is so involved with. Maybe it's just my circle it says. But, you know, why you have it 500 million in five years? It's been around for over 10 years and they're only at 180 million. So why haven't they pushed more and what causes them to accelerate over the next five years? What gets them from 35 million today to 60, 70, 80 million U.S. users in five years? Sure. Yeah. No, there are a few things. I mean, obviously, I think the way phrase that, like a lot of their growth has been international too, more so than U.S. users.

I think they have a few challenges. First is that, like, a tweet doesn't only have to live on Twitter the platform. So the exposure that tweets get is way beyond the actual user base. And historically, they tried to figure out ways to monetize that fact. But I don't necessarily think that was the right angle. It was kind of like mistaking the forest for the trees. what they really have had a big problem with is onboarding. And I think, you know, the unlock to this problem, it'll drive churned down.

It'll bring more people on. And it all relates to how they as a platform have to evolve from like the way Twitter exists today in advertising terms as well is that they don't know your interests. What they do is they know that you follow certain people. people, and they're inferring what interests may be based off of who you follow. And so, you know, they've been doing a lot of work on topics and trying to understand what your interests are without that layer of abstraction. And the closer they could get to your interests and knowing your interest, the better the advertising can be. But importantly, you know,

think about onboarding. I've had to manually onboard some of my friends and family who I'm like, would love Twitter. They're like, oh, it's too hard. It's too hard. And I'm like, okay, let me do this. I know what you like. I know people who are engaged in the verticals you like. I'm going to sit here and I'm going to take your phone and follow all the people I think you'd like. Now go try it and see where you go. And these are some of the most addicted users you'd ever imagine. But without me having sat them through the onboarding process, they didn't want to engage. And how do you solve that, right? You solve that by instead of onboarding being a blank slate and an empty canvas and you're like, what do I do? You say, you know, in the process, what are you interested in? You click your

interest and it gives you people that, you know, automatically you have a feed that starts populating with stuff that you want to see. And so I think that's the big unlock. I think that's the big opportunity. And that's, you know, I think a big part of why they've already started, you know, they haven't pushed topics into the onboarding process directly. But I think that's part of it. I think the other problem, you know, what I think really helped, reaccelerate and reignite user growth. Because remember, user growth was stalled for like five years. And it started inflecting upwards before COVID. So a lot of people have lost that, you know, the 20% year-over-year user growth, the first quarter of it preceded COVID. It did not take

COVID to get back to those levels. They had a big problem with safety. Too many people take it for granted because right now everyone's focused on free speech. But holy shit, if you don't have a safe environment, you don't have free speech either. And Twitter had to crack down on certain kinds of behaviors. And it was especially toxic for like prominent high profile women. So like, you know, there were certain cohort of people that just wouldn't get on Twitter because they didn't think it was comfortable enough. They didn't think Twitter was creating an environment where they could feel safe putting out their thoughts. And that's, you know, people want to talk about censorship as violating free speech. So is having an army of trolls. I had one instance where I engaged with someone and the amount

of vitriol I got back off of it was just like, it wasn't even something political. I had said praiseworthy things about Ben Bernacki. And God forbid, you say that to a certain cohort of Austrian economists who are very good with memes and their own bot armies. Rudy von Havenstein, I think he's one of the most toxic accounts in the Fintwick community. Sorry, I do have to call him out by name. But the amount of vitriol and trolls that were sick on me for like a couple weeks, I, like, couldn't even engage. I couldn't see that I was actually getting people engaging with my other tweets. Like, that's a violation of my free speech because I couldn't do anything. I couldn't, you know, be a part of the platform for two weeks. I can't believe Ben Bernacki

is what set off the, is what set off the troll. But no, look, I agree with you because I remember the Leslie Jones thing, and that was such an eye-opener for me. And she went off the platform and the stuff she was seen. Because, like, you know, I, you and I are both white men. and sometimes you just don't even notice the thing. He's like, nobody would do this. And then like, you know, my wife sometimes when I see the, it's more in person because she's not a huge Twitter user, but it's so easy to have the wool pulled over. And then you realize, like, hey, 50% of people are women.

And a lot of them do not feel comfortable on this platform because of, and I agree with you. It needs to be a safe space on the virtual thing. I treated something positive about Bill Gates, who I think is like maybe the greatest American of the past 50 years. And I mean, I got some real crazy stuff. Yep. And by the way, by safe space, it doesn't mean that you can't be exposed to ideas you don't like or agree with.

But it does mean that when you put out your own thoughts, you can't get attacked repeatedly in crazy kind of ways. Yeah. I'm telling you this Von Havenstein thing, like the amount of things that were coming into my notifications, it was like the volume, it was so voluminous. I, like, Twitter was useless to me in, in that period of time. Like, that just can't happen. Yeah. Just on the ad targeting, I will just say, as we were talking, I kind of flipped through my Twitter, top five ads, New York Times, for me, for me, New York Times,

Motley Fool, NFL, data science at Berkeley, Louis Vuitton. You know, not the best targeting, but I'd say that's pretty good, pretty good. So a couple years ago, you know, it was all just random clickbait stuff. So I do think we've seen an improvement over the last. Can I give two awesome anecdotes I've had in the last week as far as targeting are concerned? I tweeted out a picture of myself skating on my pond six years ago. Yeah, yeah, right, exactly. I was lamenting how it hadn't frozen in six years.

And the next ad I got served was a Bloomberg targeted ad on investing in an era of global warming. And I thought that was like phenomenally astute targeting. The second one that I got was I tweeted out. It was a great back and forth with Nongap about Bill Brewster's podcast, not recording appropriately. And I blamed like my saying proxy instead of Form 4 to Nogap on being slightly hung over. And within a minute, I was getting Advil ads on Twitter. And so I do think the platform's gotten way better at targeting.

I do think there's a gap. I'm on Android. I think the targeting is way better on Android than it is on Apple right now. It's better on desktop than it is on Apple as well. So I think there's something to be said about that. And by the way, that's true across any open website that you have. So some of the complaints I don't necessarily think are entirely valid, but they've gotten so much better. It's not even funny.

And I get some pretty good ones. If I look at my feed right now, I'm getting Wall Street Journal, Chipotle, and man, am I craving a burrito today? I don't know how it knew. I don't know if that's push or pull. And then, obviously, you know, you get some dinkier stuff in there. But I definitely think it's gotten a lot better. So I want to be cognizant of time, but I want to ask one last question. So Twitter's got their first analyst day in four years, five years.

I can't remember how long. in a long time coming up towards the end of February. So what do you just, you know, what do you expect to see and what would you like to see at that analyst day? Because I think analysts that, you know, a lot of time, a lot of effort goes into these things. It's your first one in several years. You've got two activists on the board. Like they're going to be putting their best foot forward. So what would you like to see there? Yeah. Okay. So there are going to be a few things I really want to see some indications that I might see some of what I want to see. So I've been like, call it agitating for a while about this subscription thing. My last conversation.

They're like, hey, you might see something soon, but don't get too excited, right? So, you know, and I think the real key is there was a tweet from Kvon Backpore, who's had a product now. And my understanding was he was one of the bottlenecks to Twitter actually doing subscriptions. And around that time of that last conversation, he had tweeted out like, hey, what do you all think of some sort of subscription-like feed? And so just him tweeting that out, suggesting an openness to it and reading the response. responses. It's like, yeah, I think something is cooking in the oven. I don't know exactly what. Didn't that send Twitter stock hire? That was the hiring. It was a job posting with Project Griffin. And by the way, my conspiracy theory on this all, right? You mentioned the Zuckerberg

clown car gold mine thing. A Griffin and mythological lore lay his golden eggs. Oh, there you go. I like it. And so I don't think the name was chosen accidentally. Like I do think there's some thought that goes into these names. I think there's some like, you know, call it cryptic references that they purposely do with these kinds of things. And so maybe I'm reading a little too much into it, but I definitely expect to see something on that. I also expect to see more of the roadmap on what they intend to do with ad copy, with the ad formats as they move their ad tech stack forward. So there was a very notable, I think, on the Twitter blog, the Twitter company blog, I can't remember if it was in the infrastructure part or one other part of it, where they talked about the debut of the Carousel ad format.

And so this is something they should have had done sooner. They couldn't do it until they were done with their ad tax stack rebuild. But they also gave actual results on measurement and attribution and how it's performed compared to other formats. And I think that's really interesting. I'd hope they speak a little more to how their ad copy experiments are actually performing. I want to see more of the roadmap forward. Like they've talked about how after they finish map, right? I do think the map, Ned called it Map 1.9 at Barclay's conference in the fall.

I think Map 2.0 is going to be like fully debuted with the analyst day, which gives them the opportunity to talk about where they're going next. So some areas I'd like to see, a self-service ad format, something geared toward SMB, you know, a lot better campaign builder where people can. could choose multiple objectives instead of merely engagement. It's one of the biggest critiques I hear from advertisers. These are all things that are low-hanging fruit that every other ad platform has that they know they have to build towards.

So I expect to see the roadmap debuted there. I think there might be some indications of native commerce potential on Twitter. And so to make it holistic, talk about how they want to be their top of funnel, but move down the funnel to each incremental step where they could be adding more value to advertisers. So those are the kinds of things I'd really like to see. You know, one thing I just want to say about Twitter in general, like so much of our conversation is built around like, okay, this is bad at Twitter. What's the bare case? Like, why is this so bad and all that? There's so many great things on Twitter and there are a lot of things

that they've done really right. And through it all, like, oh my God, like I think, you know, I don't expect to engage any less in Twitter. I think most of their active users don't expect to engage any less than Twitter down the line because there's so much value that we get out of it. It's just funny to me how much of the conversation, like, you start with what's negative and speak to where it could get better as opposed to like all the awesome things about it. Yeah, I think it's one of those things with products that you love because Twitter, it's the most useful thing in my toolkit. I love the product.

And I think it's very easy to just imagine all the ways it could be better, but it's already a pretty damn good product. Last thing on the analyst day, so you mentioned a lot of things like, more on the product side you want to see. Is there anything on the financial side? I've been very disappointed in the share buyback. They said they were going to start it in Q4, I think, but I've been disappointed that. If they hit your numbers, or even if they hit like kind of what everyone expects them to hit, they're going to be throwing off a lot of free cash flow. Do you want to see a capital allocation framework? Do you want to see a long-term financials target, kind of like what Dropbox does? Is there

anything kind of on that financial side you'd like to see there? That's a great question. I'm glad you asked me. I really want to see a few things in particular. One of the ones, ones I've been pushing them on for a while is give us a long-term framework on what to expect with CAP-X. If you use 2017s, CAP-X as a percent of revenue in your, you know, call it at maturity, in contrast to 2019's level, the valuation of the business is very, very different, and there would be meaningful upside to where I'm expecting things to go. But I think the reason- 2017, 300 million in CAP-X, 2019 approaching 550, if I'm thinking, so we're talking a quarter billion dollars difference of capex if i'm kind of doing round numbers is that right yeah but more look at it

as a percentage of revenue so like when you go backwards um i wasn't on the right page here 12 and a half percent versus 17 and a half to 20 percent exactly exactly so that's a really big difference but i think now that the a ws announcement is real that's where things get really interesting so i've been speaking to some people uh who had worked on the technical side of social platforms And they suggested that where Twitter to stop using their own servers and go all in on AWS, their out-year margin targets could be lifted by 10% if not more. And CAPX goes down a pace, right? So the call it like the financial framework, the guidance, the long-term framework, would look very different on AWS and it would look not on AWS. And they had never really communicated the magnitude and the significance of that.

So I'm really hopeful that they do put out some sort of new framework on what things look like, on where CAPEX truly goes long term, and how they see the interplay of the lower investment in their own servers, the faster dev times. And, you know, the fact that it is actually, you know, shifting CAPX to an operating expense, though they should have the capacity to lift margin targets long term nonetheless. So I want to hear how that all plays out. flows through. What do you think margins look like for the business in call it three to five years? You know, what I've been working with because they just don't give us enough color is I've been expecting them to kind of like hover around 35% on EBIT. Okay. Which is beneath their 40 to 45% long term framework, a range that they had been flirting with, you know, in 2018 when they did have to like prove that they could turn around and actually create a healthy financial profile. Yep. No, you know, I think that's right. I just, when I think about Twitter, like, I'm just surprised that longer term, even 40 to 45 percent, you know, I just think about this business. I'm surprised it wouldn't be even higher than that because, you know, a frequent pushback is like, they spend, where's a stock comp number, $400 million a year in stock comp and $700 million a year in R&D? And you kind of look at it and you're like, where is this going? You know, like great, we went from 140 to 280. characters. And I get like there's a lot of backend stuff and stuff. But like it does seem like

the costs are way out of line with kind of what you're getting. I get there's behind the scenes ruling. But I do wonder if there's like a knife to be taken to this organization at some point. Yeah, I kind of think it's been happening, but slowly and steadily instead of, you know, just like one day chop it off. Right. So stock comps come way down. Don't, don't phrase stock comp and R&D is duplicative in that sense, right? So it's not the 700 plus the 400. A lot of That's dot com is going into R&D. I think they've been way more disciplined on that front. And I can't imagine that Jesse Cohen sitting on the board being like, yeah, let's just

dilute the shit on this. That's one of the reasons I was so excited, particularly Silver Lake got involved in there because they, you know, they've run tons of very high profile software as a service, tech companies. Like I thought they would really, they could really come in there and apply a lot of discipline to, hey, do you really need to be paying this much money to this group? of scientists or whatever the cases, but that's one of the reasons I really like them going. Anything else you want to talk about on Twitter? I know we've hit a lot. We're kind of running over

time, but I love this conversation. I'm happy to keep going. Yeah, I mean, I think just reach out to me on Twitter if you're listening because I do love the engagement on Twitter. Like personally, it's been just a totally serendipitous platform for me. I've learned so much from so many different people. Andrew, you being one of the ones I've learned so much about TMT. And, you know, I really love reading the content that people put out there on Twitter. I think it's one of the most powerful engines democratizing access to information and, you know, letting me engage with certain people who I otherwise never might have met. And so, you know, I think not enough people appreciate some of the good things for Twitter. One other thing I'd

point out, I think Twitter as a platform, they've been reluctant to piss off their users. And, you know, I think Zuckerberg's been far more cavalier with that. He's like, if I think something is the right thing to do, I'm going to do it. And a good example of that is like, I think Twitter knew for a lot longer than they actually did than before they acted on it. That like 140 characters was too little. Yep. But if you remember the day that they went from 140 to 280, no one was talking about anything other than how stupid that was. And, you know, you didn't hear any people be like, whoa, yes, Twitter, this is awesome.

you just heard the complaints and it was an echo chamber of complaints because passionate users hate change. They're really loud. They're really vocal and they don't like anything. Think about the re-archistrated timeline. People are really loud, really vocal. Twitter was a little reluctant to kind of like mess with people's experience. And I think they should be a little more willing to withstand that one-day storm because it really is just a one-day storm. Like no one's talking about like, oh God, I wish Twitter had 140 characters, not 280 now. You just don't see it. So that's something that you have to get used to, both as someone who engages on Twitter. Like, you have to understand these things don't, don't endure as problems. And you have to understand as an investor. Like, I think it's going to, it's going to look

very similar like the Trump situation. No one's going to be talking about having banned him like five years from now as relevant to the business in any way, shape, or form. Like, if the business goes wrong, it'll have come from a very different direction than that. And so, you know, that's the final point I would throw out there on the company. Hey, no, that's perfect. Elliot, I'll be sure, just so everybody can contact you on Twitter. We'll have your Twitter account, everything in the show notes, everybody can follow you, find you. I love talking to you. Really enjoy this conversation and look forward to having you on the podcast again at some point in the future. Awesome. Likewise. Thank you, Andrew. Have a good one, man. You as well.