Twitter's stock price soared over 15% last Thursday on the back of an earnings report where the company disclosed its first-ever quarterly profit. Things seem to be looking up for a company that has seemingly limped along over the past few years. In addition to a stock price that peaked within two months of the company's IPO and has been falling ever since, Twitter has had to deal with scandal, executive shake-ups, and lackluster growth for much of its life. Is today's earning release a sign that Twitter has turned over a new leaf? Or will it continue limping along as other technology startups seem to pass it by?
I believe that not only is Twitter's uptick justified but that Twitter is in fact grossly undervalued and has the potential to be one of the most important companies of the next decade.
One of the mindset shifts that I have been working on as I try to learn as much as I can about the venture ecosystem and evaluating startups is thinking not about what can go wrong, but what can go right. This optimistic mindset is absolutely key to success when investing in startups. Venture capital is the art of capital risk maximization. Bets are made upon the riskiest assets on earth in the hopes of investing in a Google or a Facebook somewhere along the way. The vast majority of startup companies unfortunately fail. All the returns in this industry are driven by the small percentage of companies that don't simply succeed but explode to unprecedented heights. When viewed through this hopeful and optimistic lense of "what could possibly go right" Twitter can be seen in a new light; not as the 140 character social networking app that it has (up until recently) always been, but as a company poised to act as the fulcrum upon which the next generation of technology leverages.
What is this next wave of technology? Think back to just a few weeks ago when Grandma was asking you over Christmas dinner how to set up a Coinbase account and you will have your answer.
The next step improvement in information technology will be the sort of distributed networks popularized by Bitcoin and enabled by blockchain technologies. These technologies are in their absolute infancy, but anyone who scratches the surface of learning about them can see that they hold incredible promise. Distributed networks promise a secure and anonymous democratization of information and services to all mankind.
But how does Twitter fit into all of this?
These distributed networks are not without their downsides. For every step improvement in security or privacy, sacrifices must be made in areas such as performance and stability. Efforts are underway by brilliant engineers and thinkers to correct these fundamental performance issues, but the reality is that we will never reach absolute parity between decentralized and centralized networks. And even if we could, we don't want to. There will be inherent value to centralized networks that decentralized networks will never be able to truly mimic, as in doing so, they would lose the core attributes that make them worthwhile.
Getting there. I believe that we will see the unassailable rise of distributed networks built upon blockchain technologies over the next decade. I further believe, that we will see a trend of centralized network differentiation move in lock step. Centralized networks will always have areas where they are superior to decentralized networks. As the importance of decentralized networks begins to work itself into our everyday lives, a select few centralized networks will have the opportunity to truly set themselves apart by becoming a defining pillar of connected technologies.
Twitter has the opportunity to take ownership of the aspect of centralized networks that is important now, but will become absolutely fundamental during this shift towards decentralized networks.
Twitter has the opportunity to become our online identity.
Anonymity has been a hallmark of the internet since its inception. Privacy is important, but equally important is accountability. The rate at which we see examples of the dangers of unbridled anonymity on the web accelerates by the day. Anonymity creates distance and distance allows us to see each other as something less than human.
Look at cyberbullying.
Look at #FakeNews.
Look at Swatting.
Look at scams that are meant to prey upon the uninformed.
It is time that someone draws a line in the sand and says no more. It is time that we build systems of accountability online. It is time we begin to once again treat each other as human.
Twitter can be this flag bearer. Twitter currently has 330 million unique monthly users, each with a unique username tied to their identity. They are in pole position to assert themselves as the foundation of identity on the web. We could see a world where your twitter handle becomes your online identity reserved for you and you alone. A world where twitter is the gateway to not only interact with people, but businesses, events, experiences, and yes, even blockchains. A centralized identity platform would remove friction between interactions on the web while increasing the transparency and accountability to all parties involved.
Would this cure the web of toxicity and mistreatment?
No. Mankind was able to put one another down long before we got our hands on smartphones and it will be able to do so long after we put them down for whatever comes next. What is undeniable is that more and more of our interactions with one another are taking place within a medium where accountability and humanity are obstructed by the opacity of anonymity. As decentralized networks with the ability to connect anyone across the globe become a part of our everyday lives, it will become even more important to have an anchor point to our fundamental identity on the web.
Twitter can be this anchor.
Will they do it?
Probably not. It would require bold and visionary leadership not seen at that company since its inception.
Could they do it?
Yes. Even if you account for the unlikeliness of this scenario, given the potential value of being the identity pillar of the internet, one must conclude that Twitter is significantly undervalued. Not for what it is, but what it could become.
Twitter, meet Identity as a Service.
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