Twitter is seeing an ‘unprecedented rise’ in competitors, professor says

MIT Sloan School of Management Professor and Author Sinan Aral joins Yahoo Finance Live to discuss Elon Musk stepping down from Twitter as the company’s CEO, what this could mean for the social media platform, an unprecedented rise in users leaving the platform, and how he would run Twitter if given the chance.

Video Transcript

BRAD SMITH: All right, guys, switching gears, talking Elon Musk here. He's confirmed that he's going to step down from the helm of Twitter upon finding a new successor and shift his focus to the engineering side of the social media company. This comes after Musk posted a poll on Twitter where 57% of respondents voted for him to step down as the head of a company-- of the company, Twitter. Sinan Aral, "The Hype Machine" author, and David Austin, professor of management at MIT, joins us now. Great to have you here with us today.

First, when you just kind of look back on, of course, the very official poll, obviously, that went forward over Twitter and the respondents and, ultimately, what Twitter has looked like, the entire headache that surrounded it since he's taken over, what do you really look at and extrapolate from this? What are we going to be saying years from now about this?

SINAN ARAL: So the last two times-- thank you very much for having me. The last two times I was on with you guys, I predicted two things. First, that the deal would go through, and that Twitter-- that Elon would have an unbelievable difficulty running Twitter. I think I quipped that it's not as easy as colonizing Mars. And I think he found that out extremely fast.

First was the content moderation decisions. He basically abandoned content moderation. You saw a lot of privacy, security, and safety staff flee or be fired. This created an unprecedented rise in hate speech and misinformation. On the heels of that, you saw advertisers fleeing Twitter. In the most recent weeks, you saw him banning journalists, first with no reason, then he claimed for doxing him with the promotion of the Elon Jet account, either mentioning it or linking to it. Then those journalists were restored.

He then set a policy that links to competitors, like Mastodon and even other social media sites would be banned, which is clearly anti-competitive. Then he reversed that policy. And then at the end of all of this chaos, he put a poll up, and the overwhelming majority of 57% said please step down. You are a complete disaster as CEO of Twitter. And it looks like he's going to do that.

This is a great thing. He really had no idea what he was doing. You know, he is obviously a great entrepreneur. He's got amazing track record at Tesla, SpaceX, and other companies. But this one proved too hard for him. And I think we'll all be happy to see a new CEO soon.

JULIE HYMAN: Well, but new CEO, Sinan, doesn't mean he's actually leaving the company, right? He's still going to-- and we have seen before that even when, sort of, personalities like him step aside, it doesn't mean they're really stepping aside. He said he's still going to run the software and server part of the business. I'm curious if Twitter's past the point of no return in terms of its identity as a social platform.

SINAN ARAL: Well, two thoughts. So, Julie, great to see you. Certainly, he has a hard time letting go. And he has an even harder time staying out of the spotlight. He desperately wants to be talked about. And he desperately wants to talk about himself. It is strange to me to see such an investment, a leveraged investment, into a company, and then to not have a fiduciary responsibility to have it run properly by somebody who would put the priorities of the company first.

The second point in my mind is that, yes, we are seeing an unprecedented rise in the competitors to Twitter. Is it going to be the same? Is it going to be the town square? Or are people going to flee to Mastodon and Post and other types of alternatives? I think we'll see. We have seen an unprecedented rise in folks using Mastodon, using Post, especially Mastodon. We'll see whether Twitter remains the primary go-to source of town square conversation.

BRIAN SOZZI: Sinan, if you were named CEO of Twitter today, what would be your first three moves?

SINAN ARAL: You know, it's funny that you say that, Brian, because in all confidence, I do know that my name has been put forward for that role. I doubt that I would take that role if it was offered to me. But I would do a couple of things. It's not to say that Elon didn't have some good ideas for Twitter. For example, I do think that they could make more money if they had a subscription business. But they would have to do it well.

They would have to do it such that it wouldn't result in a lack of access for those without means. But you could charge different tiered accounts that were institutional accounts or bigger accounts or business accounts. You could charge for the blue checkmark, like $8 as he suggested. But you can't get rid of the verification step and have anyone who pays $8, be verified. That was a complete disaster. You need to maintain the verification.

So what I would do is I would immediately investigate new revenue streams, including new advertising revenue streams, new subscription revenue streams. I would immediately reinvest in content moderation, verification safety, security. I would make sure that our privacy-- chief privacy officer, our chief security officer, our chief safety officers were in place, had teams that were intact. The content moderation policies were consistent, intact, and being enforced. That would be important to bringing advertisers back.

And then I would get out of the way and stop making Twitter about myself. I would try to be a CEO that was running the company, not a CEO that was using the company as my own personal microphone.

JULIE HYMAN: Yeah, I don't know that there's much hope of that happening, Sinan. I do want to ask you about some of the competitors that have come up, right? There's Mastodon. There's Post. There's some others out there. Do any of them pose a real competitive threat to Twitter?

SINAN ARAL: Not currently. Not currently. But that can change very quickly. So as I described in my book, "The Hype Machine," this economy runs on network effects. And network effects build on themselves. In other words, when you have unprecedented growth in a company like you saw with a Facebook, like you saw with Twitter and other companies, TikTok most recently, that success breeds additional success and builds on itself. And it's very difficult to dislodge a large company that has very strong network effects, like these companies do.

However, the other dark side of network effects is that if the public loses trust, these types of networks are what economists call tippy, which means that they could tip completely in the other direction. And you could see a fleeing away from companies. And we have seen exactly this between Myspace and Facebook back in the 2005, 2006 era. And we could see it again. It depends on the policies of the platform. And it depends on the forward-looking beliefs of the consumers about which platform is the best place to be and which one will be the winner eventually.

JULIE HYMAN: Sinan, while we have you here to broaden it out a little bit, as we look to 2023, what would be your sort of big, single prediction about social media, any kind of prediction for next year?

SINAN ARAL: Yeah, I think that my big prediction for the coming year with regard to tech and/or social media is automation, automation, automation. And there, I'm talking about Chat GPT. This was a revelation on the heels of many other such revelations in what are known as these sort of large language or large vision models that are based on deep learning-- DALL-E, DALL-E 2, Chat GPT, all put out by OpenAI and other companies and consortia.

What these models do is they statistically take in large amounts of data, and then they make inferences about how to answer questions or complete thoughts or to write paragraphs. And as I showed on my own Twitter thread, you can use Chat GPT to write speeches. You can use Chat GPT to mint cryptocurrencies. It even writes computer code. There have been many comments about how we can no longer tell what is actually written by a human and what is not.

I've seen people say how soon with synthetic Netflix, where the scripts are written by computers and then the deepfakes are deepfake actors acting in the shows, when will those shows, those synthetic shows, be more compelling than real actors and real writers? It poses very disruptive challenges for the economics of the content industry, whether it be writers, producers, editors, as well as the visual arts industry.

We saw the Lensa app that was essentially using art by artists, and then statistically creating new art from that raw material. What does that mean for the artist? What does it mean when automation hits speech, hits texts, hits visual, and the rise of synthetic content. That is going to be the story of 2023, in my mind.

BRIAN SOZZI: Sounds like a fun and interesting world. Sinan Aral, "The Hype Machine" author and David Austin professor of management at MIT, good to see you. Have a great rest of the holiday season.