The end of cheap scale?

More important than who owns Twitter is whether anybody can create a massive new social networking service. Also, what would a non-profit version of Twitter—let’s call it Quack—look like?

By Brad Berens

As I wrote last time, I’m taking a break from the endless hand-wringing around Elon Musk’s acquisition of Twitter. The more interesting question is whether anybody can do anything to prop up any massively-scaled social networking service in an age of ever-increasing fragmentation?

In other words, is this the end of cheap scale?

By “cheap scale” I really mean cheap digital scale where a service can quickly and profitably reach billions of people (users, audience members, customers, consumers) using hardware that people already own (smartphones, tablets, computers) and bandwidth that they already buy.

Instagram famously had only 13 employees when Facebook acquired it for $1 billion in 2012, but in the two years after it launched Instagram had earned 50 million Monthly Active Users (MAU). Today it’s two billion MAU.

The trick word a few paragraphs ago was “profitably.” TikTok reached one billion MAU in under three years, but ByteDance, its Chinese parent company, is not profitable and may never be… particularly if the company has to spin out TikTok or partition its data to continue operating in countries like the U.S.

But TikTok does not have to be profitable anytime soon to be a success because it isn’t a Venture Capitalist (VC)-backed startup the way most American digital success stories have been. Here’s a snippet from recent Wall Street Journal coverage:

TikTok’s emergence “was just something that was unimaginable,” Snap Inc. Chief Executive Evan Spiegel said last month, as part of an announcement that his company would be slashing jobs. “No startup could afford to invest billions and billions and billions of dollars in user acquisition like that around the world.”

With increased Federal scrutiny about big digital companies swallowing startup competitors (like Facebook did to Instagram) and Apple’s App Tracking Transparency changes throttling surveillance capitalism, I don’t think there will ever be another Instagram.

All of this leads me to refine my question even more: is this the end of cheap, digital, VC-backed scale?

The VC equation: 15x in 5 years… are there alternatives?

Just to be clear up front: I do not have an axe to grind with Venture Capitalists. I advise VCs, and VCs have funded change-the-world technologies when nobody else would.

But venture capital also has its limitations, chief among which are the success metrics.

A few years back, a friend who is a prominent California VC explained what it takes for a VC to succeed: a $500 million dollar fund has to return $1.5 billion in five years. However, since most of the companies that any VC backs fail, the rare success has to be huge—a $100 million investment must grow by 15x to that target $1.5 billion. That ain’t easy.

With ByteDance’s deep pockets, TikTok doesn’t have to conform to that growth expectation or that timeline.

And it’s not just companies coming from other countries that are creating alternatives to VC-backed startups.

Signal, my favorite messaging service, is privacy focused and owned by a nonprofit foundation. Signal is virtually identical to WhatsApp, only it doesn’t exploit user conversations for profit.

Signal has an NPR-like model: it needs to scale to 100 million users so that enough of them will donate, say, five bucks a month to keep the service going. 100 million MAU is a lot, but it’s tiny compared to the billions that VC-backed digital companies need.

Lots of alternatives to Twitter have started up—particularly conservative ones like Gab, Parler, and Truth Social—but they’re all playing the VC 15x in 5 years game.

My question is whether there’s a nonprofit version of Twitter that can become a sustainable service. Let’s call this nonprofit Twitter “Quack.” (My thanks to Rita Berens, a.k.a. Mom, for this giggle-inducing name.)

Signal : WhatsApp :: Quack : Twitter

What would it take for Quack to happen? On the technology side not much. There’s little technologically unique about Twitter.

Although it isn’t necessary for Quack to succeed, it sure would be handy to have a friendly billionaire give it a head start… like WhatsApp co-founder Brian Acton did when he gave $50 million to the Signal Foundation or what Craig Newmark has been doing with his foundation. This is also akin to when Jeff Bezos bought the Washington Post or when Dr. Patrick Soon-Shiong bought the Los Angeles Times, although those newspapers are for-profit.

With increased Federal scrutiny about big digital companies swallowing startup competitors (like Facebook did to Instagram) and Apple’s App Tracking Transparency changes throttling surveillance capitalism, I don’t think there will ever be another Instagram.  All of this leads me to refine my question even more: is this the end of cheap, digital, VC-backed scale?

Even without a sugar daddy or sugar mommy, Quack can launch… it will just take longer to get to sustainability.

Quack will have immediate advantages.

Without the need to scale to billions of users quickly in order to secure a big payday for its investors five years later, Quack could launch with “prove you’re a real person” requirements that avoid Twitter’s bot problems. Building a real audience would also make the service more attractive to advertisers (who might be able to write off advertising on a nonprofit, particularly if it can count as sponsorship).

Twitter’s new owner will need to cough up $1 billion per year in order to service the debt he took on buying the company. Quack would have no such challenge.

If you’ve been following the coverage, then you’ll have heard that lots of Twitter users don’t feel it necessary to pay for Twitter when it’s owned by the world’s wealthiest individual. Quack wouldn’t have that baggage. It could launch with a freemium model where users get a baseline service level free but have to pay a modest amount ($5/month) once they’ve reached, say, 5,000 followers. Users with even more followers would pay more but would also get higher levels of service.

Without Twitter’s desperate need for scale, Quack could also launch with clear and fair content moderation policies, saving it from the dilemma Twitter faced when it saw the 45th president violate its terms of service repeatedly but also saw that 45 drove time-on-platform engagement worth roughly $2 billion per year to Twitter.

Quack’s biggest challenge would be the “what a drag” problem: how would soon-to-be-former Twitter users extract their followers from Twitter (or any other service) and coax them to sign up for Quack? But again, without the VC-driven need to grow fast, Quack could take its time and focus on growing strong. I can see users Tweeting “Take the Quack Pledge” on Twitter in the days before leaving the platform, letting followers know where to find them. As more and more users are leaving Twitter, this is becoming more and more imaginable.

With even a modicum of success, Quack would quickly find that it isn’t the only non-profit social networking service, but that’s fine. Democracies have room for different networks with different flavors and audiences. Quack might even follow Signal’s lead and open source its code base to make it easier for other networks to launch.

Any billionaires out there who wouldn’t mind making life just a little bit harder for Elon Musk?


Brad Berens is the Center’s strategic advisor and a senior research fellow. He is principal at Big Digital Idea Consulting. You can learn more about Brad at, follow him on Twitter, and subscribe to his weekly newsletter (only some of his columns are syndicated here).


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November 9, 2022