Friday, Oct 28, 2022 • 56min

Emergency Pod: Elon Musk Owns Twitter

Hard Fork
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We look into the company’s weird new future with Times tech reporter Kate Conger. Plus, how Apple is single-handedly deciding the future of the digital economy, and a social media death watch.
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Speakers
(3)
Casey Newton
Kevin Roose
Kate Conger
Transcript
Verified
Casey Newton
00:00
Well, we made it four episodes before our first emergency podcast, Kevin.
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Kevin Roose
00:04
I've always wanted to do an emergency podcast, but actually doing it is a little more frantic than I would have anticipated.
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00:18
I'm
Kevin Roose
, I'm a tech columnist at the
New York Times
.
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Casey Newton
00:21
And I'm Casey Newton from Platformer, and you're listening to an emergency edition of Hard Fork.
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Kevin Roose
00:26
It's about 8 PM Pacific on Thursday night.
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Casey Newton
00:30
No part of me thought that this was how I was going to be spending my Thursday evening.
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Kevin Roose
00:34
Ahah. I am frankly a bit shocked that this actually happened.
Elon Musk
as of a couple hours ago is the new owner of
Twitter
.
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Casey Newton
00:44
You know, even just hearing you say it out loud, it sounds surreal. It is going to take a while for it to "sink in", as
Elon
might say.
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Kevin Roose
00:53
It sounds a little bit like the front page headline in like a movie, you know about the future. Like space magnate buys microblogging platform. It's just like, but this is real! This happened just a couple hours ago.
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Casey Newton
01:10
I read it with my own eyes and the best part is that we have basically no idea what is going to happen next.
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Kevin Roose
01:15
Yes, okay, so Casey, let's just catch up on what has happened. So on Wednesday we learned that
Elon Musk
was actually at
Twitter
headquarters in
San Francisco.
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Casey Newton
01:26
And not only was he there, but he brought a sight gag with him!
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Kevin Roose
01:29
Yeah, this was one of the weirdest parts of this whole thing. He shows up at
Twitter's
headquarters in
San Francisco
carrying like a sink, and the whole point of this was to be able to make a joke on
Twitter
that said "let that sink in".
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Casey Newton
01:44
Yeah it was, it was prop comedy, it was given carrot top.
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Kevin Roose
01:48
So he shows up at
Twitter
headquarters, he meets with a bunch of employees, he apparently you know makes the rounds and sort of shakes some hands and gets a coffee at
Twitter's
like in-house coffee place. And we don't hear anything more on Wednesday and then on Thursday he was reported that he brought in engineers from
Tesla
to look at
Twitter's
code.
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Casey Newton
02:15
Yeah which by the way I just like to imagine how that goes, right. So you know like engineer frank or whoever comes over and looks at the
Twitter
code and they're like yeah you really couldn't run that on a car. Like what are these people saying about the
Twitter
code!
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Kevin Roose
02:27
Right, what can you learn about
Twitter's
code in a couple hours as a car engineer, but I would love to have been a fly on the wall for that conversation.
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02:35
And then just a couple hours ago we learned that
Elon Musk
had officially closed his deal, he is the owner of
Twitter:
$44 billion. One of the biggest tech deals in history.
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02:49
And immediately he fired at least four top
Twitter
executives. So
Parag Agrawal
,
Twitter
CEO is gone, Ned Segal, the chief financial officer, also gone.
Vijaya Gadde
, the top legal and policy executive, she is also gone as well as Sean Edgett, the general counsel, all of them are gone. And
Twitter
is owned and operated by
Elon Musk
.
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Casey Newton
03:17
Yeah. And by the way, talking to
Twitter
employees this afternoon, there's been almost no communication from the company to them.
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03:25
They're just sort of waiting around and I think the reason is that even though this was a legal process that played out according to the laws of the land in a lot of ways, if you're a
Twitter
employee, it kind of feels like a coup right? Like a new regime came in, swept out all the leadership.
Share
03:40
There was supposed to be an all hands that got canceled, and I think it's because there's still trying to figure out what is the chain of command who is authorized to speak when they're authorized to speak, what do they say? So it was a real scene of chaos inside
Twitter
today as people were mostly looking to reporters on
Twitter
to try to figure out what was happening at the company.
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Kevin Roose
03:60
Yeah, it seemed like it was just total chaos over there. No one knew what was going on or who had jobs and who didn't, I will say there's probably no clean way to do a transition like this to do a take private deal for a company with thousands of employees.
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04:15
Where frankly a lot of the existing employees don't like the new owner, and have said so both publicly and privately. So this was always going to be messy, but I was shocked by just how fast it all happened.
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Casey Newton
04:28
I mean, you know, look, I sort of disagree there. If you wanted to make it less messy, you know you could have done, waited more than 10 minutes to fire the CEO, right?
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Kevin Roose
04:38
True, true, ahah.
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Casey Newton
04:38
Like they could have held a meeting on Friday and said they had
Elon
and
Parag
sitting next to each other and say, you know, "This is a big milestone in the history, the company in I'm gonna ride of Parag. Into the sunset and hi, I'm
Elon
and I'm going to appoint a new
CEO
". Any of those things could have happened, but they did not happen.
Share
04:54
Right. And I think the top leadership at
Twitter
, most of them expected to lose their jobs. They were...
Share
05:00
They were counting on! Vecause they were going to get millions of dollars if they did.
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Kevin Roose
05:04
Right, so
Parag Agrawal
will get a nice payday.
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Casey Newton
05:07
$42 million dollar!
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Kevin Roose
05:09
Yeah, he will get a nice payday right off into the sunset. I'm sure the other executives will have some payouts as well.
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Casey Newton
05:16
Wait, let me ask you a question and I'm sorry to interrupt you but I have to ask right now. Isn't
Parag Agrawal
tenure as
Twitter
CEO one of the most legendary
CEO
runs of all time? The man comes in in November, he's gone by October, he makes $42 million by mostly just not tweeting and sending out a weekly email saying no new information will be in touch when we have more.
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Kevin Roose
05:37
Yeah, it's one of the great deliveries of CEO performance in history. It's it's also just... I mean to be clear like
Twitter
employees are going to make off pretty well financially from this deal. The ones who own stock - I mean I'm sure they're having a lot of mixed emotions right now - but they are getting a much higher price for that stock at $54.20 a share than they would have gotten on the open market.
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Casey Newton
06:03
Yes, that's true. Although for what it's worth, I've heard from very few of them jumping for joy over the payout from the sale of the stock, right? There sort of much more concerned about what the future is gonna look like. But I do think that that is a fair point. The
Twitter
folks and this is why Parag is getting that 42 million. They got the absolute best price for this company that you can imagine.
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Kevin Roose
06:20
Right, which doesn't mean that they're going to be happy about this, and I know you and I have both spent months talking to
Twitter
employees who are just distraught at the prospect of
Elon Musk
taking over. In part because it means that a lot of them will likely lose their jobs.
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Casey Newton
06:33
So Kevin, you mentioned that you and I have both been talking to
Twitter
employees today and I sort of learned two interesting things that I think are worth sharing. What is that the
Washington Post
reporter earlier this week that
Elon
was planning on laying off up to 75% of the company, which is a staggering number, right?
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06:50
And someone sent me a video today from when
Elon
was walking around the coffee shop and this employee sort of nervously says to him like we're very excited to work with you. But I think the question on everyone's mind is are you about to fire 75% of us? And Elon sort of like looks up at the ceiling for us and he says, "Well I don't know where that number came from, because no, like that, like that number didn't come from me".
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07:14
And so everyone sort of laughed nervously but I thought that was interesting both to see the interaction and to hear him say at least to those employees, he's not going to get the company at least to the levels that some people have talked about.
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Kevin Roose
07:27
I will say that it would be a very
Elon
move to then go like, "I'm actually firing 80% of you! See, I was telling the truth wasn't 75".
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Casey Newton
07:36
That is dark and yet can I really disagree. I'm not sure that I can.
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Kevin Roose
07:41
So okay, so he's denying that the bloodletting at
Twitter
is going to be as bad as it had been previously reported. What else did you hear today?
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Casey Newton
07:48
So inside the company Slack at one point today, after
Elon
has been walking around, a VP post a note where he sort of updates everyone at the company on what Elon has been doing since he's been inside the headquarters and it's very, very upbeat.
Share
08:05
You know the, there's a quote where the VP rights over all the tone was very positive and upbeat and he's been curious about our business, which is the absolute funniest thing you can say about a man who's just spent $44 billion to acquire you, because he's really looking forward to kicking the tires on this thing, figuring out what it is, what it does!
Share
08:24
But then the in the sort of note they go, they say sort of two interesting things. One is
Elon
wants subscriptions to be 50% of revenue at some point, and he thinks that if
Twitter
had more credit cards on file, it could help the company with bots.
Share
08:41
But Kevin talk about what a big percentage of revenue 50% would be for
Twitter
.
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Kevin Roose
08:46
Yeah, I mean, what is what our subscriptions, I think
Twitter's
revenue right now is about 90% from targeted ads That 89%. So this would be just an absolute overhaul of their business, which is not to say it couldn't happen, I mean.
Share
08:59
But arriving on day one or day minus one of his tenure with these sort of, I don't know, incomplete half-baked ideas for how to turn the company around, it's not something that would inspire a lot of faith in me if I were a
Twitter
employee.
Share
09:13
One thing I've been wondering Casey, have you seen any
Twitter
employee be publicly excited about this? Is anyone sucking up to the new boss? Is anyone saying, you know, "I'm so excited to listen and learn from
Elon
, one of the great operators in technology history".
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Casey Newton
09:29
You know, I have not seen that you would sort of assume that that would be going on and yet we have not seen many of those tweets. I couldn't point you at one, you know, at the same time. I think if you were an employee who really liked
Elon Musk
, you probably wouldn't want to tweet about it publicly and invite the criticisms of everyone on
Twitter
who does not like
Elon Musk
, which is a substantial number of people.
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Kevin Roose
09:52
Got it, got it. I will say, I don't think
Elon Musk
will follow this advice, but if I were him, I would not search my name in
Twitter
Slack on the first day that I get access bad idea.
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Casey Newton
10:03
Twitter
needs to nuke that Slack and start from scratch like yesterday if they haven't already.
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Kevin Roose
10:09
Yeah, there's a lot of people like furiously deleting old messages right now.
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Casey Newton
10:12
So I want to read you one more paragraph, which I would describe as a paragraph that is re with meaning and I can't tell you, I can explain all of it but I think it's tantalizing for people who are listening to this, wondering what does
Elon
owning
Twitter
mean for like the future of content moderation and just sort of generally what his policies will be.
Share
10:30
So it says here is the top line for vigia and council. So that suggests to me that this was maybe a meeting with with with the G and the legal and policy teams. And the VP - this is again this is happening in Slack, right - discussed ideas around the future of
Twitter
and having it on your own terms:
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10:47
Content moderation, working with foreign governments standards of speech around the world, section 230 - he was very knowledgeable about this and its importance to
Twitter -
also discussed his work with
Starlink
and how he's providing internet to countries like
Iran
and
Russia
without government interference and what this could open for
Twitter
.
Share
11:05
There's a lot in there and it clearly seems like it's mostly off the top of his head. But man, there's a lot of really tantalizing ideas in there about what
Elon -
Twitter
could look like.
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Kevin Roose
11:18
So Casey, we have so much more to discuss about this deal but I just got a very exciting Slack message from my colleague Kate Conger who is breaking a lot of the news on
Elon
and the
Twitter
deal for the
New York Times
tonight. She has been covering this deal for months and months and months and she knows more about it than anyone I know. So she...
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Casey Newton
11:36
She's also stayed up past 8:30 PM?
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Kevin Roose
11:39
She is burning the midnight oil and she is going to come on and talk with us about what she is hearing about this deal.
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11:47
Kate Conger. Hello?
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Kate Conger
11:50
Hi...
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Kevin Roose
11:50
So it seems like
Elon's
I guess he's calling himself the chief Twit now, Is that his official job title? Do we know or is that just what he's calling himself?
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Kate Conger
11:59
We don't know if that's the official title but you know, he does like to have a silly title so he May keep it.
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Kevin Roose
12:06
So his first move as chief Twit appears to have been firing at least four top executives including
Parag Agrawal
CEO. Have you heard anything more about potential executives being fired or additional moves that he's going to make just in the next few hours?
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Kate Conger
12:24
I have not. We do know that the next big vesting date for a lot of
Twitter
employees is November 1. So that's the date where they're expecting to receive their next stock grant or you know, once the company goes private, that will be a cash grant.
Share
12:42
And so at this point there's sort of a race against the clock for
Elon
to try to make some decisions about the layoffs that have been discussed and try to sort of beat the clock so that those cash grants don't need to be paid out if those employees are laid off prior to that deadline.
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Casey Newton
12:59
So November 1st is Tuesday. So is there really a chance that like on Monday hundreds of people lose their jobs?
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Kate Conger
13:05
Yeah, I think so.
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Kevin Roose
13:06
Possibly thousands. I mean that would be a lot, but that's sort of the magnitude of what's been expected.
Share
13:12
So all three of us have been really chasing this deal and reporting on it and talking to people surrounding the deal for months now and it can be easy to get kind of caught in the sort of frenzy of activity in moments like this.
Share
13:27
But I think it is worth just taking a step back and thinking about how major and frankly historic this deal is, this is the largest leverage buyout in history. This is one of the biggest technology deals ever. It's the first time that a major social network has changed ownership since
Myspace
was sold.
Share
13:49
And I think it's also in some ways the culmination of this kind of decade really of transformation in
social media
. So I've been thinking about sort of a decade ago when
Twitter
and
social media
were seen as this like liberating force almost.
Share
14:07
This thing that powerless people dissidents marginalized groups were going to use to start revolutions to occupy Wall Street, to take down, you know, Sopa and Pipa or whatever people were fighting about on the internet 10 years ago.
Share
14:22
And over the past 10 years, it really feels like Twitter and other social networks really became more of a tool for the powerful than the powerless.
Share
14:31
And what better symbolism could there be than at the end of that decade, the world's richest man buying and taking over
Twitter.
So Kate, Casey, what are your thoughts on that?
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Kate Conger
14:42
Yeah, I mean, I think you're right, I think smart premise Kevin, good job, ahah.
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Kevin Roose
14:47
I may or may not have just spent the past like 12 hours writing a column about this.
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Kate Conger
14:50
But I do think that this is sort of a transformational moment in
social media
history, you know, these companies are almost universally founder-led and very tightly controlled by the founders, right?
Share
15:04
So it's someone who built the product from the ground up, feels very strongly about it personally has this very intimate connection and understanding to the product that they're building.
Share
15:15
And there is something I think to having an outsider come in and try to run the company in a different way and it's something that we don't often see in tech, but I feel like we're going to start seeing more and more of.
Share
15:28
You know, there are things about this that remind me of the shift at
Uber
, going from a founder lie founder controlled company to moving under new management and a new
CEO
and being run in a very different way, and I think that this transition for
Twitter
is probably going to feel similar in some ways to that.
Share
15:48
You know, having the direction of the company change, having the priorities change, having a lot of the employees leave, having, you know, a lot of new executives come in and try to reshape the company into something different.
Share
16:01
And I guess it's a sign of just the industry growing and maturing and some of these companies getting to the stage in their lives where they can be bought out, but it also is something like you said, where this company is going from a platform that is used by people who do not have a voice and are trying to access a voice, and going into this new era I think that that might change and other platforms might start to be the destination for people to go to speak out.
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Casey Newton
16:31
You know, a few things that I would say in the interest of playing Devil's advocate, you know,
Twitter
was a very poorly run company for a lot of years. I think if you were a victim of abuse and harassment on this platform between say, you know, 2008 and 2017, you probably didn't feel like you had much of a voice on the platform, right?
Share
16:49
A lot of good folks were, you know, suffered targeted harassment campaign. So I think that's worth saying it's also was saying that, you know, Musk has said he wants to this platform to host more speech, he wants to eliminate what he sees as improper censorship and while there are plenty of examples in his past of him doing the opposite in his companys, if he actually lived up to that?
Share
17:12
You know, maybe this could steal
Twitter
could still feel like a platform that gave a lot of people a voice.
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Kevin Roose
17:19
I hope it does. Can we talk just briefly about this tweet that
Elon
put out earlier today, this message to
Twitter
advertisers? Truly one of the most bizarre twists in this whole thing.
Share
17:31
So
Elon Musk
has railed against advertisements for years, he has said that he wants
Twitter
to move away from ads to subscriptions, and then today on just the precipice of this deal closed, he puts out this statement on
Twitter
says, "Dear
Twitter
advertisers, I wanted to reach out personally to share my motivation in acquiring
Twitter".
Share
17:53
And then he talks about how the reason he acquired
Twitter
is because he thinks it's important to the future of civilization to have a common digital town square, and then he starts talking about how much he wants advertisers to support this.
Share
18:07
He says,
"Twitter
obviously cannot become a free for all hellscape, where anything can be said with no consequences".
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18:14
And then he talks about how "advertising when done right, can delight, entertain and inform you it can show you a service or product or medical treatment that you never knew existed, but is right for you. Fundamentally
Twitter
responses to be the most respecting advertising platform in the world".
Share
18:29
So my first question is who actually wrote this and why is this being posted on
Elon's
Twitter
account today?
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Casey Newton
18:37
I mean I think today was the day that
Elon
must realize that 89% of
Twitter's
revenue is targeted advertising. Like is there any other explanation?
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Kate Conger
18:44
It's funny that you're saying like who posted this on this on his account? Because a lot of what he said in that message is really similar to the things that he said back in April, when he first announced that he wanted to buy the company, he said, you know, "this is important for the future of civilization" and that was kind of how he was sort of fitting the
Twitter
deal in with his persona as this like Space explorer, right?
Share
19:08
Like these are all projects that have the potential to radically alter our civilization and do things for humanity that sort of his vision for it.
Share
19:16
So these are things that he said before and I think, you know Casey is absolutely right,
Twitter
needs to make money now more than it ever has. It's being loaded with a significant amount of debt and he's going to have to start making those interest payments.
Share
19:31
And so it is very important to reassure advertisers about the platform not becoming, in his words, a hellscape. Because advertisers have been really worried about that and worried about if these content moderation protections roll back, are there ads going to be running next to really controversial or unseemly content.
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Kevin Roose
19:53
Right, so let's talk about that content moderation policy change that we all I think expect is coming and could be coming very soon.
Share
20:02
Do you have any indication Kate, Casey, about when these rules are going to change? When the people who were banned from
Twitter
previously are going to be let back on including Donald Trump. When is this all going to happen? Are we talking tomorrow? Are we talking Monday? Are we talking in a month? What do you think?
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Kate Conger
20:20
I think that this is one of the things that
Elon
has said that he wants to do and made a top priority and so I think that those things are going to have and fairly quickly. I mean you know we saw he took control of the company and immediately moved to fire some of these executives who he's been criticizing for quite some time.
Share
20:36
And so I think that demonstrates the pace at which he wants to move on some of these priorities and I think we will likely see him move very quickly to try to unban some people who have been kicked off the platform and roll back some of the content moderation policies that
Twitter
has had in place.
Share
20:53
And you know this is a very interesting time to be making those moves right? Brazil has its presidential election this weekend, you know, the midterms in the US are in another weekend, a few days or so.
Share
21:07
So, you know, these are very important moments where the integrity of the information on the platform is very important and it will be put to the test and you know if he decides to roll back some of these rules and the next day or two, then we're immediately going into elections that are going to be a little bit more of a free for all that they have in the past.
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Kevin Roose
21:26
Yeah. So I've been glued to
Twitter
all night, like I'm sure both of you have, there are a lot of people who are sort of performative lee saying that you know, "I'm leaving
Twitter"
, "I'm going over to some other social platform mastodon" or something like that or you know, "catch me on Tumblr" or whatever. Sort of making a show that this is their last day on
Twitter
, they will not be part of the
Elon Musk
Twitter
regime.
Share
21:53
Question for Kate and then for Casey, do you think these people are actually going to leave? Do you think there will be a significant number of people who delete their
Twitter
accounts in the next 24 hours? Or is this just a small but vocal minority.
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Kate Conger
22:07
I think that there are some people who will leave the platform and I've seen some people talking about it obviously on
Twitter
saying you know, "I'm gonna" - like you said - "my great my
social media
presence to this other place follow me there".
Share
22:20
I don't know I mean these moments of people leaving a platform are so hard to predict and I think that they come in these moments of really intense outrage where the platform has done something or something has happened on the platform that people find so objectionable that they just kind of rage quit the platform.
Share
22:41
And I think that the deal going through maybe isn't that moment, but there May be decisions or things that happen at
Twitter
down the line that are going to be those inflection points that cause people to say, "You know what, I've had enough, I'm done, I'm out of here".
Share
22:57
But I don't think that just the deal closing is that gonna is that outrage moment.
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Casey Newton
23:02
I think that's exactly right. People have a lot of feelings about
Elon Musk's
good and bad, but you know, outside a very small percentage of people who I think are just outraged at the idea that he's bought the company. I think most folks will be willing to give him some sort of grace period.
Share
23:17
They want to see what kind of steward is he going to be of this company. Certainly during the acquisition process, it didn't feel like he was being a very good steward of it. He was criticizing this thing and its executives over and over again, didn't really seem like he had a lot of fully fleshed-out ideas for what to do with it.
Share
23:33
Then he spent months trying to get out of buying it right. So it's really hard to look at all of that and assume that it truly is a new day and he's turned over a new leaf. But at the same time, we do have to wait and see because what other choice do we have?
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Kevin Roose
23:45
Yeah, I think everyone who is still on
Twitter
at this point is like a diehard addict. Like they're not going anywhere including me. Like I was thinking tonight, like, do I really want...
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Kate Conger
23:57
I thought you wanted to start TikToking...
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Kevin Roose
23:59
Well, maybe this is the start of my
TikTok
era, who knows anything?
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Casey Newton
24:05
You're an incredible dancer.
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Kevin Roose
24:07
Okay, thank you for joining us. I know it's late and I really appreciate it. It's great to talk to you.
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Casey Newton
24:12
Thank you so much.
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Kate Conger
24:13
Great to talk to you guys to you.
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Casey Newton
24:20
Well, believe it or not, Kevin, more things happened in the world of tech this week and we're going to get into them.
Apple
is raising the rent on the digital economy in ways that concern me. And you have some thoughts about the current state of
social media
. Let's talk about both of those after the break.
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Kevin Roose
24:38
Let's do it.
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Casey Newton
24:53
Alright, Kevin, I would like to talk about some stories this week that I imagine you ay have seen. If you've been following sort of all these little like dribs and drabs about changes that
Apple
made to the
App Store
like review process?
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Kevin Roose
25:06
I have sort of but I have to confess that every time a story involves
App Store
guidelines or privacy policies, my eyes glaze over and I stopped paying attention.
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Casey Newton
25:16
That's completely reasonable, and yet that's why Hard Fork is here for you to walk you through things that maybe sound a little boring, but are actually going to change the entire future of the digital economy.
Share
25:25
So I want to walk you through a handful of stories that if you sort of knit them together, tell you about just how much influence
Apple
has over not just the products and services that we use every day, but about entire businesses that will now just never be able to be built.
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Kevin Roose
25:42
All right, I'm ready.
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Casey Newton
25:43
Okay, so all of this really stems from something that sounds kind of boring, which is that
Apple
updated its guidelines for the
App Store
review process.
Share
25:54
What does that mean? Well, you're a developer, you have a hot new app, maybe you have a
Twitter
replacement that you've just put together and you want to put it into the
App Store
. But in order for it to show
Apple's
human reviewers have to approve it and that's really good, tight? It keeps a lot of really terrible things out of the
App Store
.
Share
26:11
But over time and well from the start, but also increasingly over time reviewers are using that process to dictate what kinds of businesses can and cannot be formed on, you know, on this platform.
Share
26:24
So basically this week the company updates about 700 words revising the
App Store
guidelines, and here are a few things that come out of that, those changes.
Share
26:35
Number one, they say, "Digital purchases for content that is experienced or consumed in an app, including buying advertisements to display in the same app, such as sales of quote boosts for posts in a
social media
app must use in app purchase".
Share
26:51
I understand how boring this sounds, but you've been on
Facebook
, you've seen boosted posts, right? So somebody maybe you have a farmers market and you post to your farmers market page the tomatoes are really good this season, and then you decide to boost that. Well up until today
Facebook
has been able to collect all of that money.
Share
27:09
Now
Apple
says, "Actually if you want to sell boosts in your app you're gonna need to make that available as an in app purchase". And do you know how much of a percentage
Apple
gets from that?
Share
Kevin Roose
27:19
30%?
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Casey Newton
27:20
That's Right. So they're gonna get 30% of all that going forward.
Twitter
has boosts,
Tinder
has boosts, and they've already been using in app purchases for those boosts, but
Meta
hasn't. So with this update,
Apple
is effectively asking
Meta
to cough up that additional 30%.
Share
27:34
And this of course comes on the heels of
Facebook
last year saying that it was going to block
Facebook
and other
social media
companies from tracking you around the web. So it essentially made their ad business much worse.
Share
Kevin Roose
27:43
Right, and this 30% cut has been at the heart of a lot of the attacks on
Apple
. To be clear, like 30% is the rate that the top apps pay. I think you have to generate more than $1 million 30%. I think for smaller apps it's more like 15%. But the big apps, they have to pay 30%. Now, this 30% is extending to this new category of purchases.
Share
Casey Newton
28:05
Right? And so the question is, you know, why do this now?
Facebook
has been doing this forever.
Apple
is printing money.
Share
28:14
But you know, inflation is out there. It wants to preserve its 45% gross profit margins. So what does it have its reviewers do? Hey, why don't we go back through those ap guidelines and see where else we can squeeze out an additional 30%.
Share
Kevin Roose
28:26
Okay, so that's one thing that the, in app purchases of boosts on
social media
.
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Casey Newton
28:31
Number two:
Spotify
.
Share
28:33
Spotify
competes with
Apple
.
Apple
has a music streaming service. So does
Spotify
.
Apple
music service has a big advantage, which is that it doesn't have to pay itself 30% of all sales for people who subscribe through the app, right? So this is a real challenge to
Spotify
whose main business for a long time was selling music.
Share
28:52
So Spotify decides to diversify, it decides we're going to try to take over literally the entire podcasting industry so that we can better compete with
Apple
. And then they introduce a sort of a new plank in that strategy which is that they're going to sell audiobooks.
Share
29:05
But there's a problem here too because as you know, if you've ever tried to buy a
Kindle
book on your phone you can't do it right, it just sort of says mysteriously you can't complete this purchase here. For some reason - wink, wink - maybe go to the web right?
Share
29:19
So
Spotify
runs into a similar situation and three different times Apple rejects
Spotify
app from getting any updates at all because it doesn't like the language through which
Spotify
is trying to tell its own customers how they can go buy an audiobook on
Spotify
.
Share
Kevin Roose
29:36
Yeah, I read about this in the
New York Times
- small local newspaper, ran a story about this written by my colleague Tripp Mickle - and it described this sort of Byzantine process that
Spotify
had to go through. I've never tried to like buy drugs on the dark web. But I imagine that it is actually in some cases easier to buy drugs on the dark web than to buy an audiobook from
Spotify
.
Share
Casey Newton
29:60
And if you've bought drugs on the dark web. Send us a voice memo here at hard for we want to hear whether it was easier than buying an audiobook on
Spotify
. That was thing number two, but it's actually thing number three that I think has the biggest long-term consequence.
Share
30:14
So one of these additions to the guidelines is quote, "Apps may use in app purchase to sell and sell services related to
non-fungible tokens
or
NFTs
, such as minting listing and transferring, apps may allow users to view their own
NFTs
Provided the NFT ownership does not unlock features or functionality within the app. Apps May allow users to browse NFT collections owned by others provided that the app May not include buttons, external links, or other cost action that direct customers to purchasing mechanisms other than in app purchase.
Share
Kevin Roose
30:45
I'm officially asleep. Please tell me what that means.
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Casey Newton
30:48
So here's what it means.
Share
30:50
One, it means that if you want to sell an NFT Inside an app on
iOS
then you're gonna have to pay
Apple
your 30%. I think that's pretty standard. Right?
Share
31:01
But when you talk to crypto people about the promise that they see in
NFTs
It's that NFTs avoid these sort of gatekeepers. You can buy them anywhere. You don't have to go through an
App Store
. Right? I might buy an NFT on
OpenSea
, right? I might buy it on
CoinBase
. And when I do that
Apple
doesn't get its cut.
Share
31:19
But what if I'm a developer and I want to attach an NFT To some sort of service. Maybe if you own this NFT you get a subscription, maybe you come a member to something. And maybe you want to unlock features of that membership within your app that's on
iOS.
Share
31:34
All of a sudden,
Apple
says "no you can't do that".
Share
31:38
And so effectively it made all of those sorts of uses for NFTs worthless within
iOS
. And if you're the sort of person who has positioned
NFTs
As the foundation of a new version of the internet, one that's less controlled by gatekeepers, one where ownership isn't dictated by any one platform or CEO, this is devastating, right?
Share
32:03
Because this means that a whole pillar of the vision for web three gets wiped out overnight and you have no recourse other than to just hope
Tim Cook
changes his mind at some point.
Share
Kevin Roose
32:15
Yeah, it's it's really interesting and I feel like this has been a story that I've been kind of observing from afar for a while now, but I'm glad that you're explaining it to me because it does feel like
Apple
has gotten just more brazen about this.
Share
32:27
I mean there was that trial last year,
Epic Games
, the makers of
Fortnite,
had sued
Apple
over basically this issue. Whether
Apple
was being too aggressive and acting like a monopoly and setting up this basically toll booth that anything that happens on the
iPhone
has to go through.
Share
Casey Newton
32:46
That's right. Even if that services like mostly available on the web, right? Even if it's just sort of hinted at in the
App Store
,
Apple
sort of want to cut and I just think it's time that we have a conversation about this company, right?
Share
32:59
I think, you know, no one would dispute that
Apple
deserves a cut of revenue for you know, many or even most of the services that are provided on the apps, right? Without
iOS
as a platform, none of these apps could exist and
Apple
deserves its percentage.
Share
33:13
But what we see over time is that
Apple
wants to increase its purview into more and more kinds of economic activity, until it really is just becoming the landlord of the entire digital economy and the rent is only ever going up.
Share
33:26
And so the reason I want to talk about this is this is a show about the future and the easiest way to talk about the future is to talk about the stuff that's getting built, here's a new product, here's a new service, here's this fast growing new startup.
Share
33:36
But there's this other part of the future which is the stuff that isn't getting built because it can't get built. And so those three stories that I just walk you through is a story about the digital economy that can't exist, right?
Share
33:47
We can't have a world where
social media
companies can, you know, come up with a quick and easy ways to boost the revenue without handing, you know, a huge chunk of it to
Apple
. We can't have an easy way to buy audiobooks unless it's an
Apple
audiobook. And if you want to make
NFTs
The foundation of some kind of new digital service, it's actually not going to work on
iOS
. So your best bet is to get people to side loaded through
Android
or the entire thing, this has to exist on the web.
Share
34:09
So you know, you know how people behave this. This has a huge effect on the future of like web three to the extent it had one, right?
Share
Kevin Roose
34:17
Yeah. And developers have been complaining about this so called
Apple
tax this 30% cut for years, right? There was you know,
Spotify
among others has been complaining about this for years, and it really seems like
Apple
has been sort of tweaking things around the edges to make it seem like they're kind of loosening the restrictions.
Share
34:35
I remember after this lawsuit from
Epic
, they did change a little bit of the sort of guidelines for whether, you know, basically how apps could direct people outside of the
App Store
to buy things. So there have been some minor changes, but why do you think
Apple
is dialing this up?
Share
Casey Newton
34:54
I think that when a business figures out a way to make money, it's going to make that money, right? I think because
Apple
has a monopoly on
iOS
, it just gets to set the terms right. It knows that no one is going to switch to
Android
because it was hard to buy an audiobook, no one is going to switch to
Android
because
Facebook
had to pay a tax on boost, right?
Share
35:14
And so it can just sort of gradually extend those tendrils without too much worry. It also knows we have a congress that despite years of complaining, hasn't passed a single new law related to the regulation of our tech companies, right? So it's sort of free to get in there and do whatever it wants.
Share
35:30
So who does that leave it? Really just sort of leaves the
Federal Trade Commission
, maybe the
Department Of Justice
to if they were interested do some sort of antitrust action against
Apple
, and we should say there have been antitrust actions against
Apple
in in europe.
Share
35:45
And I imagine that we'll see sort of more of those around the world as regulators sort of get wind of this. But in the meantime it feels quite brazen. And I just think it's worth thinking about what are the costs of living in a world where some of these services just can never get built.
Share
Kevin Roose
36:01
Right. And I think it's worth trying to see this from the other perspective too, because obviously
Apple
knows that these criticisms are out there.
Share
36:10
And I think what it has said in the past is, "Look, we built the
App Store
, we built the
iPhone
, this is our platform and it costs money to run. So we have these reviewers who check every app that's listed in the
App Store
and make sure that it's complying with our guidelines, that it's not malware, that it's not spamming people, that it's not some horrible game that's tricking people into making in app purchases". "And so all of this costs money to run. And so that's why we take a 30% cut or a 15% cut of what's going on on our
App Store."
Share
36:46
So, have you talked to anyone at
Apple
? Like, what did they say to justify these positions, these changes to their
App Store
guidelines that are making all these developers angry?
Share
Casey Newton
36:55
They say exactly what you just said. And again, I'm really sympathetic to that. I think that they do deserve a cut, right? And, you know, I think there's a lot of services they provide that could probably just be done for a flat fee, right? It's like, do you really need a third of my revenue. But I do think that there ought to be limits on it, particularly when it comes to competitive services, right?
Share
37:15
It's like, you know, I think
Spotify
is a really good music service, but over time it's become less of a music service because that's just not a very good business. And it's not a very good business because
Apple
has a better one because it doesn't have to pay itself 30% of revenue, right?
Share
37:26
So I think that there is an actual harm to consumers there where we don't have the very best services because
Apple
is able to give itself an advantage in so many ways. And I just like to see that playing field leveled out a little bit more if only to make it easier for me to buy an audiobook every now and again.
Share
Kevin Roose
37:43
Yeah you have to be able to buy copies of my audiobooks easily, I mean that can't take nine steps. I do wonder though if this comes from sort of
Apple
feeling like the door may be about to close on them because as you mentioned there are all these antitrust actions happening in Europe.
Share
38:00
This
Epic Games
lawsuit is still out on appeal, there's still a chance that a judge or even the Supreme Court could force
Apple
to open its
App Store
and reduce its cut.
Share
38:13
So I wonder if
Apple
is just saying, "Well this whole party that we've been throwing for the last decade like it might be coming to an end, we might have to take out our toll booth so let's just really like crank the dials while we still have them".
Share
Casey Newton
38:25
And if that's the case it would certainly help explain why this week
Apple
also increase the price of
Apple
tv plus by, what, 40% to 6,99 a month. So yeah enjoy
Ted Lasso
at a much higher cost.
Share
Kevin Roose
38:45
So Casey your grand theory about
Apple
ruling the entire digital economy. And also our conversation with Kate about
Twitter
and
Elon Musk
really brings up this theory that I've been rolling around in my brain for the last few weeks and I want to talk to you about it right after the break.
Share
Casey Newton
39:02
No thanks. Ahaha.
Share
Kevin Roose
39:27
So Casey, we've talked about
Twitter
, but I want to spend some time talking about what's happening in the rest of the
social media
industry this week, because it has been a really brutal week. So this is earning season, tech companies are reporting their quarterly financial results and across the board this quarter, it's just been really bad.
Share
39:47
So
Snap
reported that it's losing money. It lost $359 million in the third quarter. Its stock is down about 80% this year.
Share
39:57
Meta
reported that its profits have gone down 52% from a year ago, while spending was up by nine, 19%, its stock is down about 60% on the year.
Share
40:07
And even
YouTube
, which has historically been one of the more stable
social media
companies reported that its revenue shrank in the third quarter as well.
Share
40:16
So all of the big
social media
companies and I would put
TikTok
aside for a minute but other than
TikTok
, all of the big
social media
companies seem to be really struggling right now and I think there are a few primary reasons for why this is.
Share
Casey Newton
40:30
Allright what is it?
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Kevin Roose
40:30
So the first is that it's just the economy. The economy is down inflation is high, we're may be entering a recession and generally recessions are bad for advertising-based businesses. So big companies that spend a lot on ads and
social media
and traditional media, generally one of the first things that gets cut when you enter a downturn is the advertising budget.
Share
Casey Newton
40:52
And so this one's a gimme, I'll give this to you.
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Kevin Roose
40:54
Yeah, So that's part of what's happening is just that the economy out there is bad and that's rippling through the tech industry in the
social media
industry.
Share
41:01
The second explanation is that these companies, these
social media
companies have just gotten really bloated and mismanaged, and that they're essentially undisciplined and that that's what's causing the problems.
Share
41:13
So on Monday
Altimeter Capital
, this hedge fund that owns a bunch of stock in
Meta
sent this open letter to
Mark Zuckerberg
and Meta's board basically saying that the company was bloated and lazy and that it needed to hit the gym.
Share
41:25
So I'll quote from the letter, it says, "Like many other companies in a zero rate world,
Meta
has drifted into the land of excess. Too many people. Too many ideas. Too little urgency.
Meta
needs to get fit and focused."
Share
41:40
To accomplish this goal. We recommend a three step plan that will double FCF free cash flow to $40 billion per year and focus the company's teams and investments ".
Share
41:48
And they make three recommendations. One is reduced headcount by at least 20% - so lay off at least 20% of workers - reduce Capex capital expenditures by at least $5 billion and limit investment in the metaverse to no more than $5 billion a year.
Share
42:03
So I ultimate er is saying what a lot of tech in have been saying recently, which is that these companies, they just got too big, too fast. They over hired, they don't lay people off and so they're just all kind of inefficient and that they basically need to get fit. So that's one other explanation.
Share
Casey Newton
42:19
Yeah, I mean, and I'm certainly prepared to believe that, you know, when you have tens of thousands or you know, more than 100,000 employees, some of them aren't getting all that much worse done. But I do giggle a little bit at the idea that one of Meta's problems that is that it has too many ideas.
Share
42:33
Like I feel like that's sort of a hot take like this company has two ideas like clone
TikTok
and build VR. And if they're not doing a good job, that seems like a different question than like, do they have too many employees.
Share
Kevin Roose
42:45
Right, So that's one theory that's out there. These companies are just lazy and undisciplined.
Share
42:50
The third theory is basically the, it's all
Apple's
fault theory, and this is what you'll hear from executives at some companies including
Meta
. They'll say, you know,
"Apple
through its privacy changes to
iOS
, that it implemented last year made it harder for apps to track users across the internet that in turn made targeted advertising less effective".
Share
43:11
And so now, you know, small businesses, large businesses that might have used targeted advertise a lot to reach their customers are finding that it's no longer that effective and so they're spending less on the platform and basically
Tim Cook
and
Apple
by making it harder for apps to track users across the internet have essentially killed or threatened the entire
social media
industry.
Share
Casey Newton
43:30
Yeah, so I do totally buy this like app tracking transparency, which was the name of this feature clearly did just wipe out tens of billions of dollars for all these companies. And we should say, you know, you know what else that enabled? It, enable
Apple
to build a massive advertising business, right?
Share
43:44
Like a story that popped up this week, is that developers are really mad because they're selling their podcasts or productivity apps and suddenly they began to see ads for casino gambling games that were appearing on their
App Store
pages. Now,
Apple
has since walked that back, but it seems clear that
Apple
is building a huge advertising business on the backs of these changes that it has made.
Share
Kevin Roose
44:05
So, of these three explanations, one being, it's just the economy. Two being, it's a lack of discipline at the big
social media
companies. And three being it's all
Apple's
fault. Which of those do you think is most responsible for how badly
social media
companies are struggling right now?
Share
Casey Newton
44:20
Oh gosh, you know, I don't know because honestly, Kevin, I would throw a couple other things in there. Like one is competition, right? Like
TikTok
is in there somewhere and I'd be curious to know, you know what you make of
TikTok.
And then two and I think it's sort of related is like these platforms are getting a little old and stale, right? Like every social platform is essentially just kind of chewing gum that loses the flavor after a little bit too long, and like some of these platforms are starting to lose their flavor.
Share
44:49
So I don't know like when I think of the biggest problem, it's somewhere at the nexus of all of those, where do you sort of lay the blame?
Share
Kevin Roose
44:59
Yeah, I think all of them have a lot to do with what's going on to some extent. I do think that when the economy recovers some of these platforms will have a much easier. Like
Snap
, for example, their users are still growing that is not an app that is in decline and yet they are losing money because the advertising market just isn't there.
Share
45:19
So that seems to me like an app that if the economy does turn around, if advertisers do come back, they've got the user's, their problem is not that they are losing popularity. Whereas I think
Facebook
and Instagram are in much more trouble because even if and when advertisers do come back like their usage is declining. So they are losing the thing that makes the whole equation work, which is that users want to come back and spend hours a day on these apps.
Share
45:46
But I think all these explanations still miss something for me, which is I think there's something that's actually much broader going on right now. And this is an idea that I would say is like a strong view weakly held like I maybe only have 70% confidence in it, but I want to sort of give it a test drive today with you and get your reaction to it. I think
social media
is dying.
Share
Casey Newton
46:08
Well, so what do you mean by
social media
, exactly?
Share
Kevin Roose
46:11
So I think
social media
to me means three things. It means you're a town square, you are where people young, old Republican, Democrat, you know come to discuss what's going on in the world.
Share
46:24
Number two, I think
social media
just in the name has two parts social and media. So I think it has to have both a communication layer - where you and I are sharing things with our friends - and a broadcast layer - where we can share something that then millions of people could see -.
Share
46:41
I think a true
social media
platform needs to have both, communication, sort of interpersonal communication, and mass broadcast.
Share
Casey Newton
46:49
Yeah.
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Kevin Roose
46:49
And then I think
social media
apps generally are fueled by targeted advertising that is the business model that allows them to be free that allows them to work and that uses all of that data that's cree to make the advertising experience better and make more money to pay for the whole thing.
Share
47:04
And I think all three of those components right now are kind of falling apart.
Share
47:09
So on the town square piece, we're already seeing
social media
apps start to fragment right? We have all these right wing
social media
apps, we have, you know, young people are on
TikTok
, old people are on
Facebook
. We no longer have the kind of critical mass in the U. S. of a place where everyone is going.
Share
47:26
On the second piece, I think we're also seeing a splintering of
social media
apps into communication and broadcast. So contrast like a
Snapchat
which is mostly messaging with a
TikTok
which is mostly broadcasting. And I think we're starting to see those kinds of apps separating from one another.
Share
47:45
And then I think the third is the targeted advertising piece, which I think
Apple
really is killing or at least wounding, making it harder to do that at the same profit margins and the same level of profitability as it was just a couple of years ago.
Share
47:60
And so I think for me the question is like, if the economy rebounds, if these companies do cut costs and trim the fat and become, you know lean and mean there might still be a future where we don't have these kind of big successful, ultra profitable
social media
platforms. It might just be that this sort of era in tech is over. What do you think about that?
Share
Casey Newton
48:21
So... I disagree with you. I think that
social media
is evolving but that I can go through your points and provide some counterexamples.
Share
Kevin Roose
48:34
Please do.
Share
Casey Newton
48:34
When you said that essentially there's no public square anymore because we're starting to see
social media
fragment into places where Republicans and Democrats are going to different places.
Share
48:45
The counter example to that is
TikTok
.
TikTok
is one of the fastest growing apps in the country right now. Republicans and Democrats are there. Republicans are going viral spreading their talking points just as are Democrats.
Share
48:57
So I still think you have a place where everyone is going to broadcast to discuss, look at the comments section of any viral
TikTok
, right? It's very, very sort of vibrant. It has the attention. So I think by some large measure,
TikTok
has just replaced
Facebook
as the place where we go to get our information, our entertainment.
Share
Kevin Roose
49:15
Okay, that's fair.
Share
Casey Newton
49:16
Two you say, you know, communication and broadcasts are, are separating into different things and we have our, our messaging businesses and we have our entertainment businesses. And while I think that's sort of true, it's also true that
TikTok
in particular is trying to build in all of those messaging features, right?
Share
49:37
You know,
TikTok
every now, Every time I open the app now, it's, it's saying we just found this person in your contacts there on
TikTok
want to follow them? It has a friends tap. So my friends ever posted
TikTok
, I'll see them there. It just introduced to be real close because it wants all my friends posting like a daily selfie to give me another reason to engage.
Share
49:52
So all these things are kind of constantly, you know, morphing and transforming into versions of each other. And I think you see
TikTok
, even though it started out as this big broadcast platform, it increasingly wants to build in all of those messaging features and keep it there as long as it possibly can.
Share
Kevin Roose
50:06
OK.
Share
Casey Newton
50:07
And then third, I think you're right,
Apple
really is hurting these businesses with app tracking transparency. But what that is causing is for these companies to diversify their businesses. So for
Meta
, it means they're trying to become more of a hardware business, for a
TikTok
, it means that they're gonna lean really hard into e-commerce and creating live shopping shows to try to get you buying stuff there.
Share
50:31
It's gonna let you buy sort of a digital gifts and to tips for creators who might be live streaming, right? Maybe it's gonna let you subscribe to those creators to get some extra content from them.
Share
50:43
So the businesses are evolving in reaction to what
Apple
did, but they're not going to wither and die by that alone. So you sort of add all of that up, and I do think that you're right that in one sense this era where we would all go onto
Facebook
every day and we would post are status and comment on each other's statuses, that does feel a little bit different.
Share
51:05
But I do think a new era has arrived and that era is we see funny stuff that was made mostly by kind of pro-creators are really talented amateurs. And then we discuss that over private messages. And I think that's why it really feels different, right?
Share
51:20
It's like all that conversation we used to be having. That used to be in public. It used to be very in your face, right? You would you would post every time you change your relationship status. But now it's sort of like look at this funny thing, LOL, look at this funny thing. And like that is the president of
social media
.
Share
Kevin Roose
51:36
Right. And where I think my view on that differs from yours is that I don't think that's that shift to private messaging is a temporary trend. I think that is like basically a species-level evolution.
Share
51:47
Like we had this 10 years where we were all just going ham on
social media
, posting our innermost thoughts are, you know, are things that we would normally just share with a tight group of people. All of a sudden we were posting it to everyone that we went to high school with everyone that we work with. It was this kind of like era where we didn't know how many people were listening and so we were just dancing like nobody was watching, right?
Share
52:09
And then we kind of realized oh everyone is watching, I could get in real trouble, this could wreck my social life, this could wreck my relationships with my family, this could cost me my job.
Share
52:19
And so gradually people have just been shifting to private messaging, which is a much harder business to monetize, right? Because that is where you people want not just privacy but encryption, some of them want which means you can't take their data and use it to target ads. It's also just not a place where people have traditionally had a lot of targeted advertising.
Share
52:40
I think if iMessage started putting ads into our group chats would be like, "what the hell?"
Share
Casey Newton
52:44
Like first of all don't give them any ideas.
Share
Kevin Roose
52:46
Sorry, whichever Apple VP is now furiously drafting up a memo to insert targeted ads into my message. But I do think that that's sort of a thing that we've all learned in the last decade and maybe to bring it around full circle to the
Twitter
discussion.
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53:01
Like I really think there was an era where we didn't know how powerful these apps were and I think now the secret is out right.
Elon Musk
wants to own
Twitter
not because he thinks it's a great business, but because he knows like that's where real power in today's world is. We all sort of understand the stakes and the consequences of what we post on
social media
.
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53:21
And so I don't think we're going back to a world where we kind of forget that the audience is out there and just share our innermost thoughts with the world.
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Casey Newton
53:28
Yeah, I think we're changing our relationship with that audience and we're being much more selective about when we want to be the performer and when we want to be the audience. I think there was a time when we were sort of very happy being both on any given day, and now we're really picking and choosing our moments. Which actually feels much more sustainable for the future of the species.
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Kevin Roose
53:48