mdau – Techdirt (original) (raw)

Elon May Have Accidentally Revealed How ExTwitter Usage Has Dropped Massively Since His Takeover

from the fun-with-numbers dept

Over the last few months, Elon Musk and Linda Yaccarino keep trying to claim that exTwitter is actually growing and more used than ever. Yaccarino has talked about “largest usage days” without defining the term, and Elon says it’s “user-seconds per day of phone screentime as reported by iOS & Android” even though that’s not actually a stat that anyone uses.

Meanwhile, multiple other reports have suggested otherwise. Similarweb has repeatedly noted that its stats show exTwitter’s traffic trending downward. Apptopia, which tracks app usage, has said that the actual time spent on the Twitter app has tracked downward all year since there was an initial post-Elon bump:

And a new report, again from Apptopia, is saying that its app downloads have sunk to new lows as well. Looking at Data.ai’s app download charts, the exTwitter app… is barely in the top 100 downloads. At last look, it was 96th. Which is embarrassing. More people are downloading the Jersey Mike’s app and “GeometryDash” than exTwitter.

That’s for downloads. What about usage? Well, according to Data.ai, exTwitter is now 25th in active users… right after the Samsung Clock.

But… even more notably, Elon Musk may have accidentally revealed how much exTwitter usage had dropped himself — mainly by hoping that people won’t notice how he changed the metrics being used. You see, at the same time that Elon was talking about potentially putting exTwitter behind a paywall, he also claimed that he site now has 550 million users who generate “100 million to 200 million posts per day.”

During the livestream, Musk also divulged some new metrics from X, saying it now has 550 million “monthly users,” who generate 100 million to 200 million posts per day.

Some people took that to mean that his running of exTwitter was a success, since when he took it over, the ex-Twitter (as opposed to exTwitter) management were reporting 237.8 million users. But, that’s wrong. The two things are being measured very differently, and when you break it down, Musk seems to be admitting a pretty big drop in exTwitter usage.

The 237.8 million was “mDAU” or monetizable daily active users and the first two words there are important in how Musk’s number and old Twitter’s numbers are different. As we explained (and which Musk never seemed to understand), mDAU was actually a much more conservative estimate on users, because it excluded anyone they could not monetize (meaning bots, some foreign countries, etc.). The whole point of mDAU was to be more accurate in telling advertisers how large the potential audience reach is.

Second, Twitter’s number is daily active users. Musk’s number was monthly active users. DAU/MAU ratios are actually a useful tool in determining just how sticky an app is (basically it’s looking at what percentage of your monthly users visit every day). Years ago, Sequoia Capital noted that the “industry standard” for DAU/MAU is between 10% and 20% with it being very rare for a company to be over 50%. Andrew Chen from Andreessen Horowitz has shared similar numbers, noting that if you’re DAU/MAU is 20% that’s good. And “World Class” is 50%.

Of course, this differs based on the type of app, and exTwitter is more likely to be an app that people come back to use more regularly than something like Uber or whatever. So, it seems at least somewhat likely that its DAU/MAU is somewhere closer to 50% than 20% (giving exTwitter the benefit of the doubt here!). The last stats that I found that determined a DAU/MAU for Twitter came in 2020 from The Audience Project, which put Twitter’s DAU/MAU at about 52%.

But, remember, mDAU is significantly lower than just DAU, as mDAU excludes bots and other unmonetizable accounts (remember, Musk’s big complaint was that mDAU OVER counted bots, which is why it’s hilarious that the numbers he’s now trotting out don’t even try to exclude bots). So if we assume that mDAU is 80% of DAU (which is well below Musk’s own estimate of 33% bots!), that would mean that the DAU would basically be 300 million, and if we have a 50% DAU/MAU that would put the MAU pre-Musk at around 600 million.

And now he’s bragging about… 550 million (which isn’t even in any official report, so who knows how accurate it is, given his propensity to exaggerate).

That suggests a noticeable decline in users.

Even if the mDAU/DAU ratio is closer, the MAU was at a minimum somewhere close to the 550 million he’s now claiming.

Supporting this even further, the good folks at DataReportal do phenomenal work tracking data on social media platforms, and they’ve been tracking the market that exTwitter’s own internal tools tell advertisers regarding potential market reach. And they found… something weird.

When they looked in January, Twitter’s AdManager said that there were 556 million user accounts that could be reached via ads. In April… it said 177.2 million! DataReportal knew that was too steep a drop, and reached out to Twitter, only to see that number disappear from the AdManager tool. exTwitter re-enabled the tool later in April, again with MUCH LOWER figures on accounts: 373 million. DataReportal charted all of this, and it’s… eye opening:

They note that there are many possible explanations for this change, including problems with the data, human error, and other things as well. The report goes on to conclude that traffic appears to be “slipping” but not in freefall. This would be consistent with my back of the envelope calculation above that exTwitter at 550 million monthly users is likely somewhat below the pre-Elon high of around 600 million.

But… we’re not done yet. Because the other data point Musk revealed: “100 million to 200 million posts per day” also tells us something.

That is… below what Twitter used to have. Way below. A study in 2019, that had tracked tweets per day from 2012 through 2019 showed that in 2019 tweets per day were between 320 and 340 million per day. Or… somewhere around twice what Musk is claiming today.

If Musk is accurate in saying that there are between 100 and 200 million “posts” per day (he no longer calls them tweets), that would mean not only are users dropping by some amount, and download dropping by a noticeable amount, but the number of posts per day has fallen off a cliff.

None of this speaks well to exTwitter’s chances at survival. Beyond the advertising revenue, which the company already admits is down by 50%, downloads are dropping, users appear to be dropping, and the usage by the remaining users may be significantly down as well, based on Musk’s own statements.

No wonder he seems increasingly desperate.

Filed Under: dau, elon musk, linda yaccarino, mdau, twitter traffic
Companies: twitter, x

from the no-one-in-their-right-mind... dept

As was to be expected, the Twitter / Elon Musk showdown has been zooming ahead. With a trial set for mid-October (after the Chancellor overseeing the case mostly sided with Twitter on the preferred timeline), we’re deep in the discovery process, and there have been some disputes over how that’s going. On Wednesday, there was a hearing to try to resolve both sides pushing back on the discovery demands of the other. If you want a blow-by-blow of the hearing, I recommend checking out The Chancery Daily’s twitter thread of the hearing (and if you’re following the case in general, I highly recommend following that account).

There were a few issues at play, but the key ones were how much data Twitter had to provide Musk regarding how it calculates the amount of spam in the mDAU (monetized Daily Active Users — as explained in earlier posts), and then on the flipside, whether or not Musk had to provide back to Twitter the talked about “analysis” that his team used to calculate how much spam Musk believed was in the mDAU (though, confusingly, Musk keeps pretending he’s talking about how much spam is on the platform, which is different than how much is in the mDAU, and the only part that could possibly matter is how much is in the mDAU).

The Chancellor ruled on both issues on Thursday, and as with the initial win on scheduling, on both issues she mostly sided with Twitter, but gave a little bit to Musk. We’ll start with the shorter one first. The demands from Musk to hand over all sorts of information regarding the mDAU spam calculation is practically laughed at. I mean, when the judge in your case describes your request as “absurdly broad” and later notes that “no one in their right mind” would seek to quantify that information, you know it’s not going well — and that’s exactly what the Chancellor notes here:

Defendants’ data requests are absurdly broad. Read literally, Defendants’ documents request would require Plaintiff to produce trillions upon trillions of data points reflecting all of the data Twitter might possibly store for each of the approximately 200 million accounts included in its mDAU count every day for nearly three years. Plaintiff has difficulty quantifying the burden of responding to that request because no one in their right mind has ever tried to undertake such an effort. It suffices to say, Plaintiff has demonstrated that such a request is overly burdensome.

In other words, Musk is not getting most of what he’s asking for. However, he does get some stuff: mainly the 9,000 accounts (100 sampled every day) for the Q4 estimate, even while noting that this is actually already kinda burdensome, but doable:

That said, some additional data from Plaintiff seems warranted. Plaintiff is ordered to produce a subset of what Defendants have requested: the 9,000 accounts reviewed in connection with Plaintiff’s Q4 2021 audit, which the parties refer to as the “historical snapshot.” I recognize that producing the historical snapshot is no small feat. Plaintiff represented that, with considerable effort, these documents could be produced in under two weeks, and Plaintiff shall strive to meet that timeline. In addition, Plaintiff must produce documents sufficient to show how those 9,000 accounts were selected for review.

The court notes, rightly, that this data is highly sensitive (it likely includes private data) and effectively warns Musk that he needs to treat it carefully — and they will have to list out exactly which attorneys and data scientists will have access to that data.

The court also orders some other material that it says Twitter should produce, around internal discussions of certain key metrics.

Second, as to Defendants’ mDAU fraud theory, Plaintiff has already agreed to produce ten broad categories of documents addressing mDAU, including documents reflecting Plaintiff’s reliance on mDAU relative to other metrics. Plaintiff is ordered produce a small additional set of data from its review database—documents reflecting discussion of any other key metric identified by Defendants, regardless of whether those documents expressly address mDAU. Although Plaintiff may not withhold documents in its existing review database concerning these other key metrics, Plaintiff need not engage in further collection to satisfy this obligation.

There’s one other production demand regarding something at the board and management level. But the key part — demands for massive troves of data regarding the mDAU calculation has been rejected as “absurdly broad.”

On the flip side, Twitter had demanded details of how Musk’s team had done their own spam calculation, since Musk insists in his counterclaims that Twitter is committing fraud and his “proof” is his own secretive calculations with his own data scientists. So Twitter, reasonably, asked Elon to provide that supposed analysis, and Musk and his lawyers said “nope.”

And, yes, there’s some level of irony in the fact that the entire crux of this lawsuit hinges on Musk’s (questionable) claims that Twitter won’t share with him how they calculate spam, and now as part of the lawsuit, Musk is refusing to provide the details of how his team made their own calculation.

Anyway, the court goes through a bunch of nitty gritty on when it’s appropriate to say that kind of stuff is protected and when it’s not. It’s kinda interesting to me, but maybe not for everyone so I won’t go into all the details. Suffice it to say, the court finds that Twitter’s arguments make a lot more sense than Musk’s, and the relevant precedents Twitter cites are deemed applicable, while the ones Musk cites… are not.

Defendants’ reliance on Rohm & Haas illustrates why their reliance on the because of case law is misplaced. The discovery dispute there concerned a dynamic financial model that the defendant used for corporation decision-making. The plaintiff argued that the model was critical to its ability to understand the defendant’s representations to banks, rating agencies, and its board. The defendant produced multiple versions of the model but claimed that a recently updated version was protected work product because it was created at the request of the defendant’s head of litigation for “litigation support and settlement analysis.” The court agreed with the defendant, observing that it was “hard pressed to think of any information that warrants greater protection under attorney work product doctrine than potential settlement strategies prepared at the direction of counsel.” Applying the because-of test, the court observed that “the litigation purpose of the [model] sufficiently permeates the business purpose of the model to warrant work product protection.” The court then factored that holding into the governing substantial-need standard and concluded that the plaintiff failed to meet its burden.

Defendants parrot the “permeates the business purpose” quote of Rohm & Haas in support of their position, claiming here that the litigation purpose of the Data Scientists’ Analyses sufficiently permeates their business purpose as to render them immune from discovery. The court accepts Defendants’ representation to this effect. Even so, that is not sufficient to shield the Analyses from discovery. Unlike in Rohm, Plaintiff would win under a work product analysis because it can demonstrate substantial need for the Analyses. The plaintiff in Rohm & Haas could not demonstrate substantial need because the plaintiff already had access to multiple versions of the model at issue, and the model did not form the basis for any allegations at the heart of the case. Here, Plaintiff does not have access to any versions of the Analyses, which are central to various aspects of this case.

Once again, this is not a total win for Twitter, even as it’s a pretty clear loss for Musk. The court tells Musk he needs to hand over the analysis his team did — but does provide a potential out on documents related to the analysis. The ruling says they can still go through and create a privilege log of any material about the analysis that they believe is privileged.

Summing it up, to the extent that Defendants have lodged a blanket objection to producing all of the Data Scientists’ documents as non-testimony expert materials or work product, that objection is overruled. At a minimum, Defendants must produce the Analyses.

That leaves documents and communications and drafts concerning the Analyses. Rule 26(b)(4)(B) does not apply to those materials. To the extent Defendants claim that any document contains work product, Defendants must identify that document on a privilege log. At that point, Plaintiff can seek production of specific documents

Basically, if you’re not going to provide that material, you need to come up with specific reasons for why with all of the material, rather than a blanket “we’re not handing that over ’cause it’s all secrety.” However, the court also makes clear in a footnote, that basically saying “everything here is privileged” is not something she will look favorably upon:

As a word of caution, Defendants are reminded that a large volume of logged entries can raise a red flag for the court.

This is a court being quite fair, but also seeing through the bullshit on the Musk side. Once again, it’s not a total victory for Twitter… but it’s all pretty clearly a loss for Musk.

Filed Under: delaware chancery court, discovery, elon musk, mdau, spam
Companies: twitter

from the this-is-weird dept

We already wrote a long story looking at many of the eye-opening claims from Peiter “Mudge” Zatko in his whistleblower report regarding Twitter’s security operations, and the possibility that the company both has shit security practices and violated its FTC consent decree regarding those security practices. As I noted, the report is a mixed bag of things that sure sound pretty serious, and a few that are greatly lacking in context. Some of them might be really bad, but might not be quite so bad if we knew the full context.

This post just focuses on the first claims in Mudge’s report, which (honestly) seem to have been written more to jump on the current news cycle than to address an actual issue at Twitter. It’s entirely unrelated to the other claims in the report, but instead is focused on the question of Twitter and spam/bot reporting. And… it’s weird. It is framed as though it supports Musk’s claims that Twitter is lying about spam. But, the details actually show the opposite.

The media is, unfortunately, falling for the spin. The media is covering it as if the claims about spam and bots help Musk.

But that’s just reporters buying into the framing, and apparently not really understanding the details.

The lawsuit is not about spam:

So, let’s dive into those details. The first and most important thing to remember is that, even as Musk insists otherwise, the Twitter lawsuit is not about spam. It just is not. I’m not going to repeat everything in that earlier story explaining why not, so if you haven’t read that yet, please do. But the core of it is that Musk needed an escape hatch from the deal he didn’t want to consummate and the best his lawyers could come up with was to claim that Twitter was being misleading in its SEC reporting regarding spam. (As an aside, there is very strong evidence that Musk didn’t care at all about the SEC filings until he suddenly needed an escape hatch, and certainly didn’t rely on them).

But — and this is kind of important — many of Musk’s claims were based on either misunderstanding or deliberately misreading Twitter’s SEC filings. As I’ve explained multiple times now, what Twitter reports to the SEC is how much spam is likely included in their “monetizable daily average user” (mDAU) accounting. This is not, and has never been, about “how much spam is on the platform.” The company came up with this other metric — mDAU — that is a segment of the total Twitter population. As Mudge’s report notes, an mDAU is defined as a “valid user account that might click through ads and actually buy a product.”

That’s not every account. There are accounts that are inactive. There are accounts that are automated (but useful — such as those tweeting out the weather or earthquakes or whatnot). There are lots of accounts that may exist on the platform, but may not be counted in mDAU. And that includes some spam/bot accounts. That has always been clear for anyone who reads the details.

Spam in the mDAU is not the same as spam on Twitter:

Next, Twitter’s filings with the SEC are only about how much spam is in their mDAU number. This takes place after Twitter has made use of other processes to try to eliminate spam accounts from the mDAU, and then they do a daily spot check of 100 accounts. That creates a sample size of 9000 over the course of a quarter (the time period between Twitter reports), and is statistically significant for declaring that less than 5% of the mDAU is spam.

Again, this has never meant that less than 5% of all accounts, or all tweets, or all activity is spam or bots. It just means that less than 5% of what is counted in their mDAU number is.

On top of this, Twitter caveats its SEC filings around this admitting that this process is highly subjective and could be inaccurate. It does this at great length:

_While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement across our large number of total accounts around the world. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the fourth quarter of 2021 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU, and have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam, malicious automation, and fake accounts. We intend to continue to make such improvements. After we determine an account is spam, malicious automation, or fake, we stop counting it in our mDAU, or other related metrics. We also treat multiple accounts held by a single person or organization as multiple mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our mDAU may not accurately reflect the actual number of people or organizations using our platform.

Musk’s entire complaint is that he relied on the SEC mDAU filings, and that THOSE are wrong

As we’ve described, this is a weak sauce argument that is meaningless. Musk claims publicly (and sort of gets at it in some of the legal filings) that he believes “spam on the platform” is more than 5%. But the (already weak and irrelevant) legal argument he is making is that Twitter lied to the SEC in saying that the spam in the mDAU is less than 5%, and that this lie will create a “material adverse event” (MAE) that allows him to scuttle the deal (again, the spam issue is not an excuse to violate the deal — only an MAE).

As we’ve discussed, all of this is nonsense. Musk seems to be — either deliberately as an excuse to get out of the deal or because he doesn’t understand some fairly basic things — conflating “spam on the entire platform” with “spam remaining in the mDAU.”

He has done this multiple times in public, and it has influenced at least the court of public opinion — many of whom actually believe that Twitter only reports that less than 5% of the platform is spam (something it has not reported at all).

Mudge’s whistleblowing report actually confirms Twitter’s position, while pretending otherwise:

And here we get into the specifics of Mudge’s report. He first trashes the entire mDAU concept, noting that it’s a scam in and of itself, in that it basically allows Twitter to fudge the numbers.

Until 2019, Twitter reported total monthly users, but stopped because the number was subject to negative swings for a variety of reasons, including situations such as the removal of large numbers of inappropriate accounts and botnets. Instead, Twitter announced a new, proprietary, opaque metric they called “mDAU” or “Monetizable Daily Active Users,” defined as valid user accounts that might click through ads and actually buy a product. From Twitter’s perspective “mDAU” was an improvement because it could internally define the mDAU formula, and thereby report numbers that would reassure shareholders and advertisers. Executives’ bonuses (which can exceed $10 million) are tied to growing mDAU.

Okay, there’s a bit of editorializing here, and I can see there are reasons to be skeptical of mDAU in general. But there are also reasons to think that (as Mudge admits) not including “large numbers of inappropriate accounts and botnets” is actually… good for shareholders and advertisers in not confusing them that those accounts might actually be monetizable. Yet there are definitely questions about how Twitter might be able to goose the mDAU numbers to its own advantage and maybe “smooth out” bumps in the road or whatnot. Not saying that’s definitely the case, but it’s a risk when you get to define stuff.

That said, Mudge also admits that Twitter is incentivized to not count spam in mDAU:

Executives are incentivized to avoid counting spam bots as mDAU, because mDAU is reported to advertisers, and advertisers use it to calculate the effectiveness of ads. If mDAU includes spam bots that do not click through ads to buy products, then advertisers conclude the ads are less effective, and might shift their ad spending away from Twitter to other platforms with higher perceived effectiveness.

So, as a start, that contradicts the claims of Musk and his fans that Twitter has incentive to look the other way when reporting spam in the mDAU because it benefits the numbers. As Mudge notes, Twitter has incentives not to count spam in the mDAU.

And then he puts forth his argument for why he thinks Musk is correct — even though it’s actually confirming that Twitter is correct:

However there are many millions of active accounts that are not considered “mDAU,” either because they are spam spam bots, or because Twitter does not believe it can monetize them. These millions of non-mDAU accounts are part of the median user’s experience on the platform. And for this vast set of non-mDAU active accounts, Musk is correct: Twitter executives have little or no personal incentive to accurately “detect” or measure the prevalence of spam bots.

So… I’m really confused by this section, and the claims that “Musk is correct.” Because in court they’re not arguing about how much spam is on the overall platform. They’re arguing about how much is in the mDAU. So, rather than supporting Musk, this paragraph simply confirms exactly what Twitter has been saying in SEC filings and in court. What it reports to the SEC is an estimate of how many spam accounts slip through other processes, and are inadvertently counted in the mDAU.

That is all Twitter has ever claimed in a legally binding way.

And here, Mudge is confirming that Twitter is not just exactly correct, but also that it is incentivized to behave exactly this way, and not at all how Musk has described.

The fact that Mudge is saying that there are spam accounts outside the mDAU… is the very point that Twitter has been making and that Musk keeps misrepresenting. mDAU does not include all accounts on the platform. And the only way in which the spam counting could even be remotely relevant to the case (and, again, it’s not) is if Twitter made a material misstatement to the SEC.

And Mudge doesn’t claim that at all. Rather he backs up Twitter’s claims that mDAU is not all user accounts and that Twitter has incentives to keep spam out of mDAU to keep advertisers happy. That supports Twitter’s legal argument and kicks the legs out from under Musk’s.

I simply don’t understand why anyone — including Mudge — thinks all this supports Musk.

I also question the claim that Twitter has no incentive to remove the spam accounts that are outside the mDAU. It seems fairly obvious why they still have incentive to try to tackle that problem as well: because if the platform is overrun with spam and bots then that will drive users away. Those users are in the mDAU and so having too much spam on the platform (even outside the mDAU) drives down the mDAU. That’s just kinda common sense.

Mudge then tries to justify how this supports Musk, but it… just gets worse and again seems to support Twitter. Mudge is a great security researcher, but when it comes to spam stuff, it’s not clear he has a firm grasp on how some of this works.

In fact, Mudge learned deliberate ignorance was the norm amongst the executive leadership team. In early 2021, as a new executive, Mudge asked the Head of Site Integrity (responsible for addressing platform manipulation including spam and botnets), what the underlying spam bot numbers were. Their response was “we don’t really know.” The company could not even provide an accurate upper bound on the total number of spam bots on the platform. The site integrity team gave three reasons for this failure: (1) they did not know how to measure; (2) they were buried under constant firefighting and could not keep up with reacting to bots and other platform abuse; and, most troubling (3) senior management had no appetite to properly measure the prevalence of bot accounts–because as Mudge later learned from a different sensitive source, they were concerned that if accurate measurements ever became public, it would harm the image and valuation of the company.

This also seems really odd. First of all, points one and two are basically life for every site integrity team in every company ever. It’s the nature of the role that it’s mostly all firefighting, and little time for larger perspective. But, more importantly the first point is key. If Twitter knew how to count all the spam on the platform, it would know how to eliminate all the spam on the platform. The company has a bunch of methods that try to limit spam, and as we’ve discussed it kills hundreds of thousands of accounts every day.

Clearly, some make it through, but “not knowing” how much spam is on the overall platform is not the smoking gun people seem to think it is. I have no idea how much spam makes it through into the Techdirt comments. It’s not as easy to count as some people think. If I did know, the answer would be zero, because I’d delete it all.

As for the claim that senior management has no appetite to measure it because it would harm the valuation, that could be, but still seems kind sketchy. First, without details on the “sensitive source,” it’s difficult to judge the credibility of the claim. Second, given that the company has spent years focusing on mDAU for exactly this reason, it’s not at all clear how revealing how much spam was on the actual platform would… impact anything? After all, the company is already focused on reporting the numbers of the users that matter for revenue purposes.

Even the Board of Directors understood the counterproductive incentives in place: In or about the Q3 2021 Board Risk Committee meeting, a Director asked why more progress has not been made around bots and related harmful content on the platform. Our client remembers an executive of the company admitting to Board members that the company had “intentionally and knowingly deprioritized” platform health to focus on growing mDAU. Afterwards, a different Twitter leader who had witness the exchange commented to Mudge, in reference to this admission, “it is very strange what this company does not share with board members, and then some of the statements that they do.”

Again, I’m confused as to what this is supposed to reveal. Wall Street — mainly Elliott Management, had literally forced Twitter to change its plans to increase its mDAU growth numbers. And that included Elliott Management’s seat on the Board. If the Board is forcing the company to grow its users, then of course the company is going to focus on growing the userbase over issues that seem secondary like “platform health.” We can argue if that was the right decision — and whether it makes sense in the long term — but the fact is that the Board and the company’s largest investors were ordering management to focus on user growth, not things like dealing with spam.

I mean, literally, the agreement with Elliott was that Twitter promised “to grow its average number of daily users who see ads by 20%.” That’s mDAU. The Board told Twitter’s top execs “grow mDAU or you’re out,” so Twitter prioritized growing mDAU. That’s… not a scandal. That’s not a bombshell. That’s not revealing anything the Board wouldn’t have already known.

There’s a bit more like this, and then Mudge claims that Agrawal’s somewhat infamous tweets responding to Musk were designed to mislead him. He’s got it almost entirely backwards.

The rest of Agrawal’s May 16 tweets aren’t out-and-out lies but they rely on wordplay to distract and mislead Mr. Musk, and everyone else. Musk appears to be asking a valid and intuitive question, what percent of accounts encountered by the media user are actually bots?

Except it’s Musk here who is using clever wordplay to distract and mislead everyone. As we’ve described over and over again, the 5% number that Musk repeats in these screenshots is about mDAU. The 5% number is what Twitter reports is the amount of spam they believe incorrectly gets counted in mDAU. It’s Musk who keeps pretending the 5% number implies spam across the entire platform, which Twitter has never said it does. As we’ve explained multiple times now, Musk is trying to distract by pretending that the 5% claim is about spam on the entire platform. It never has been. It has always been an estimate of the amount that makes it through and is still counted in the mDAU.

That is clear to anyone who’s actually read Twitter’s filing (both in the Chancery Court and at the SEC).

From there, Mudge claims that Agrawal was misleading in response by accurately detailing how Twitter narrows down the entire platform to focus just on mDAU and to figure out how much spam is there. But, he’s not. Agrawal knows that Musk keeps referring to the 5% number, and that Musk believes that’s the relevant number that has been somehow falsified in the SEC report. Agrawal’s Twitter thread is an explanation of the mDAU process.

Indeed, Mudge more or less admits this, though again he thinks it’s Agrawal being misleading, rather than the other way around.

While pretending he is answering Musk’s question, in fact Agrawal is answering a very different one, namely, Are there fewer than 5% bots in the set of mDAU accounts, as defined in secret by Twitter? Agrawal’s reasoning might appear a bit circular since, by definition, mDAU is more or less Twitter’s best approximation of the set of accounts that aren’t bots. And Agrawal is not exactly trying to help readers understand the bait-and-switch nature of his answer:

I mean, again, those tweets directly counter Mudge’s own claims that Agrawal is not trying to help readers understand. He literally says in the first tweet shown that he’s just talking about how much gets into the mDAU. And this thread was helpful to those who read it. This thread is the key reason why I understand the shell game that Musk is playing here, by pointing to the mDAU reported number as false, but talking about the total amount of spam on the platform.

In this thread, as you can see above, Agrawal is literally clarifying that point for everyone reading — not obfuscating, as Mudge implies.

So I really don’t understand this next claim from Mudge:

Unless you’re a Twitter engineer responsible for calculating mDAU, you probably wouldn’t know what Agrawal is talking about. He is not saying that fewer than 5% of all accounts on the platform are spam. He’s saying, more or less, that Twitter starts with all the accounts on the platform, tries to automatically put all the accounts that could be convinced by advertisers to buy products (but no spam accounts) into mDAU, and then uses humans to estimate the error rate of spam accounts that nevertheless slip through into mDAU. And naturally, Twitter “can’t share” its special sauce for determining mDAU.

And, um, I’m not a Twitter engineer, and not only did I understand that (in large part due to Agrawal’s thread) I think explained it to lots more people in two separate posts, because it seemed very clear to me what he was saying — and it seemed much clearer that Musk was the one misrepresenting things to his adoring fans, pretending that the 5% number is about spam on the total platform, and that Agrawal was explaining “no, the 5% (the number Twitter reports to the SEC and the only one that might sorta, kinda have some legal issues tied to it) is not the total number on the platform, but the bit that inadvertently slips through.” I mean, that’s literally what Agrawal tweeted.

As for the final line of the paragraph, which I read as sarcasm about Twitter’s inability to share its “special sauce”, is a really weird line for a security professional to include in such a filing. As Agrawal made quite clear in his thread, part of the human determination involves looking at private information, including IP addresses and other information that Twitter cannot give out because it would be a huge privacy violation that would certainly violate the consent decree that Mudge claimed was so important elsewhere.

Reading through all of this, anyone who actually understands the details — including what’s at play in the lawsuit — should see that Mudge is actually confirming the only thing that matters for the lawsuit: that the numbers Twitter reported to the SEC for mDAU involves estimating how much spam they mistakenly include in mDAU and not how much spam is on the platform as a whole. If the actual total amount of spam on the platform is higher than that, it doesn’t help Musk, because Musk’s legal argument is predicated on the <5% reported to the SEC.

Mudge is a smart dude, so I’m confused as to how he got this as mixed up as he did.

Oddly, Mudge’s report may help Musk — but in a totally different way

Incredibly, despite all of this, Mudge’s whistleblowing may actually help out Musk in a much bigger way. Musk’s entire legal argument for getting out of the deal is that (1) Twitter refused to provide him with the relevant info to calculate spam and (in his counterclaims) that (2) Twitter is committing fraud by lying to the SEC, and that could create a material adverse event (MAE) that it hid from him, allowing him to get out of the deal.

That’s all nonsense, as discussed above and previously.

However, the new whistleblower report is kicking off an FTC review, apparently EU data protection regulators are looking into it as well, and it’s possible that others are investigating too. Those investigations, and the possibility of a consent decree violation, might… actually… be an MAE that allows him to escape the deal! In addition, Mudge is alleging fraud (though that’s mostly redacted, so no idea how credible it is). And if that’s shown to be the case as well, it might also be an MAE.

Of course, there are a lot of questions before all of that is settled, and I’m not sure it would actually help Musk out. But even as Mudge, Musk, and the media all seem to think the spam stuff helps the case, anyone who actually understands what has been said, what issues are at play in the lawsuit, and how all this works knows that… it doesn’t.

Filed Under: elon musk, mdau, mudge, parag agrawal, spam
Companies: twitter

from the that's-all-you-got? dept

Last week, I wrote about Twitter’s opening legal salvo in its case to try to force Elon Musk to pay the $44 billion he agreed to pay for Twitter (or, more likely, to try to force him to pay a very large settlement to walk away). As we noted, it was a very strongly argued filing, and Musk’s lawyers had their work cut out for them. Nothing is certain in court, and getting the Delaware Chancery Court to order “specific performance” (i.e., complete the agreement you signed) may still be a long shot, but Twitter’s lawyers had a very strong opening. I expected that Musk would have a strong comeback, but many of the points Twitter raised would be difficult to refute.

Well, Musk has filed his opening in reply… and he (1) doesn’t have a strong comeback, (2) basically just ignored the points he’s going to need to refute, and (3) seems entirely focused on pushing the narrative about spam accounts (which is legally meaningless). Musk has good lawyers, and they’ve been dealt a tough hand by their client. But, still.

Amusingly, as a PR strategy, perhaps this is working. If you sample the discussions on Twitter, there are lots of very ignorant people who seem to think this filing is a strong one. They’re wrong. Musk could still succeed in this case, but it will be in spite of this filing, not because of it.

The purpose of this filing is not a full reply to the accusations, but simply an attempt to slow things down a bit. Twitter asked the court to expedite things and hold a trial in September. On the scale of “regular” court battles this seems mighty quick, but the Delaware Chancery Court is famous for how quickly it goes through its cases. It’s a very no-nonsense type of court that doesn’t want to wait around. I’m particularly interested in how the court deals with Musk adding quite a bit of nonsense to the process. Anyway, Musk doesn’t want the case to happen in September, and would prefer it to happen in February. The excuse given is the need to conduct extensive discovery to prove Musk’s point that there’s a lot of spam on Twitter.

The core dispute over false and spam accounts is fundamental to Twitter’s value. It is also extremely fact and expert intensive, requiring substantial time for discovery. Twitter is a social media platform whose self-professed key performance metric is monetizable daily active users (“mDAU”). Since the Agreement was first signed, new facts have come to light that call into doubt the truthfulness of Twitter’s curiously static representation in SEC filings that less than 5% of its accounts are false or spam.

Except, as was clearly explained in the initial filing, that’s not the core dispute at all, and in fact, the purchase agreement makes it clear that can’t be the dispute. It’s also stupid. Again, both right before and right after the agreement to buy Twitter, Musk made it clear that the primary reason he was buying Twitter was to rid it of what he believed was an overwhelming spam problem that was negatively impacting the site.

As was noted in the Twitter complaint, Musk had texted board chair Bret Taylor and argued one of the key reasons he wanted to take Twitter private was that purging all the spam would make Twitter’s numbers look terrible, and thus was better done as a private company:

On April 9, 2022, the day Musk said he wanted to buy Twitter rather than join its board, he texted Taylor that “purging fake users” from the platform had to be done in the context of a private company because he believed it would “make the numbers look terrible.”

That shows that as he went into the process of buying Twitter, he already fundamentally believed that spam was a massive problem on the site, and that removing the spam accounts would make Twitter’s numbers look awful. That pretty clearly implies that he never believed Twitter’s publicly professed numbers regarding spam mDAU’s.

For him to then come back weeks later and claim that the spam problem means he won’t buy the site makes no sense. He claimed that fixing the massive spam problem was a key driving force in agreeing to purchase the site. On top of that, given that he said he wanted to get rid of the spam, the details of how Twitter analyzed its spam issue seems like the kind of thing that he would have asked about prior to signing the deal. Instead, Musk explicitly waived the right to examine that sort of information. So, again, it’s pretty rich to argue that this is the reason he is calling the deal off.

Finally, Musk repeatedly stated that he wasn’t buying Twitter to make money on it, but rather because he thought it was important for free speech and maybe to “extend the light of consciousness” or something. So, to later say (as this filing implies) that he wants out of the deal because he doesn’t agree with how Twitter counts spam, and that might lead to him making less money on the deal, doesn’t just seem rich, it seems literally unbelievable.

And it is. Because that’s also not the reason Musk’s lawyers gave for terminating the deal. Again, because Musk wants the narrative to be about spam, but there was no escape clause in the contract about spam, Musk and his lawyers honed in on a clause regarding Twitter’s requirement to give him information necessary to close the deal. Musk then started requesting increasingly ridiculous and impossible to obtain information, which he claimed was necessary to determine the amount of spam on the platform (it was not). The contract very clearly says that Twitter can refuse to provide such information if in Twitter’s estimation it was not reasonable to provide. But that is what Musk is claiming allows him to terminate the deal.

Even given all that, Twitter’s filing explains how it still provided Musk with all of the information he requested, plus much more — and even that it tried to set up multiple meetings to explain the spam count procedure, and Musk never took them up on it.

Musk’s filing… responds to basically none of that. It just lays out some pretty silly arguments for why the spam count is the problem (which, again, is not true). And, in doing so, it calls into serious question Musk and his lawyers’ ability to understand, well, anything.

I have to say that prior to all this going down, I actually thought Musk was a tremendously innovative entrepreneur who was strategically brilliant in taking seemingly insurmountable issues and actually figuring out ways to get around them. However, his behavior since trying to take over Twitter has basically erased every bit of that, and he comes out looking like a guy who has bumbled his way into success and has no idea what he’s doing. And it shows.

Here’s the part in Musk’s filing that his fans are so excited about:

On April 28, just three days after signing the Agreement, Twitter restated three years of its mDAU numbers, despite never disclosing the issue to Defendants pre-signing. Post-signing, Defendants promptly sought to understand Twitter’s process for identifying false or spam accounts. In a May 6 meeting with Twitter executives, Musk was flabbergasted to learn just how meager Twitter’s process was. Human reviewers randomly sampled 100 accounts per day (less than 0.00005% of daily users) and applied unidentified standards to somehow conclude every quarter for nearly three years that fewer than 5% of Twitter users were false or spam. That’s it. No automation, no AI, no machine learning.

Except, that makes Musk and his lawyers look extraordinarily foolish. The paragraph is either a direct misrepresentation of what Twitter actually does or (worse) Musk and his lawyers have absolutely no clue how everything works.

First of all, as Twitter’s CEO Parag Agarwal detailed, the company has tons of processes (many of them automated) that remove over a half-a-million accounts every day that they suspect are spam. The paragraph above falsely implies that Twitter just looks at 100 accounts a day for “identifying false or spam accounts.” But that’s not what Twitter is doing. It notes that after it has done all of that (mostly automated) blocking and filtering of spam, on a daily basis it consistently randomly samples 100 accounts for thorough human review.

This is actually very good statistical technique. Basically, it’s saying that after using the automation/AI/machine learning tools to find and kill off most spam (contrary to Musk’s claims that no automation is used), Twitter is then constantly doing spot checks using actual randomization and careful human review — something that takes time.

And while 100 accounts “sounds” small, it only is if you don’t understand statistics at all. Twitter claims to have about 215 million daily active users in the most recent quarter for which they’ve reported numbers. If they’re sampling 100 accounts per day, that’s 9000 accounts per 90 day quarter. Putting those numbers into a margin of error calculator we see that the margin of error is 1% at a 95% confidence interval. That’s uh… pretty good.

If you bump it up to a 99% confidence interval, the margin of error is just 1.4%. So, if Twitter is using this sampling method to determine the percent of mDAUs that are spam, that’s actually a pretty good statistical method and one that should provide pretty accurate results.

This does not mean that less than 5% of all tweets or less than 5% of all accounts are spam, by the way. Just the monetizable daily active users. To get to that number, it’s possible that Twitter discounts spam or fake accounts that it simply does not include in its list.

Either way, the only way to look at this central claim of Musk’s response is that Musk is bad with statistics. You could say that it’s just his lawyers who are, but Musk had to have signed off on this filing, so it seems fair to say that he doesn’t understand some fairly basic things about how statistics works.

And, again, none of this actually matters to the underlying issue in the dispute: did Twitter violate its agreement with Musk by failing to provide necessary information to Musk that in Twitter’s estimation were “reasonable” and necessary for Musk to complete the deal? That’s the actual crux of the case, and Musk and his lawyers basically ignore it just to rehash the “but there’s so much spam” argument.

His lawyers also include a footnote that has Musk fans slapping each other on their virtual backs about how the company has no sense of humor:

With the sense of humor of a bot, Twitter claims that Musk is damaging the company with tweets like a Chuck Norris meme and a poop emoji. Twitter ignores that Musk is its second largest shareholder with a far greater economic stake than the entire Twitter board.

This footnote is clearly designed to delight Musk’s fans online, but ignore the actual reasons those posts were included in the complaint — to highlight the pattern of behavior by Musk since signing the agreement to effectively diminish the overall value of Twitter, perhaps as an excuse to get out of the deal or (arguably) to try to pressure Twitter into selling it to him for even less.

The fact that Musk is the second largest shareholder doesn’t much matter in this situation, given that he’s trying to buy the rest of the company, and has a strong incentive to tank the value to make it cheaper to buy.

The other aspect that Musk really harps on in the filing is that Twitter restated its mDAU figures right after the deal closed.

Just three days after Defendants signed the Agreement, Twitter restated its mDAU figures in its Q-1 2022 10-Q, disclosing it had been double counting users since the first quarter of 2019. (Ex. 3 at 2) By restating its financials, Twitter effectively admitted that changes in mDAU are material and portrayed its “estimates” as precise.

But, the restated mDAU numbers are such a miniscule change, the argument that they are somehow material is difficult to take seriously.

That’s it. Basically it’s less than a 1% change. It is difficult to argue that this restatement is material in any real way.

I don’t know if the court will allow for the expedited trial to occur. There may be good enough reasons to hold off until February as Musk wants (as he notes, the financial commitments he has don’t go away until April). But, Twitter does have a pretty strong argument that having its own ownership in limbo is incredibly damaging to the future of the company. How can it strategically plan for things when it has this potential buyer looming over everything it does?

Given that, it seems like there are many good reasons to expedite the trial, and the fact that Musk doesn’t think he has enough time to figure out how many spam accounts are on Twitter doesn’t even matter to the issues in the case. The issue is whether or not Twitter abided by the agreement in providing necessary information to Musk, and it has made a very strong case that it did (and that Musk ignored or refused to meet with them when they wanted to provide more).

Again, anything can happen in court, and the Delaware Chancery Court is no exception. But, if you can get past the narrative and some fairly ignorant Musk fans, this case still looks like Twitter has a massive advantage. Musk may enjoy spinning narratives for his fans online, but it seems like it will be harder to string along a Delaware chancellor the same way…

Filed Under: breach of contract, calculations, delaware chancery court, discovery, elon musk, expedition, mdau, statistical relevance
Companies: twitter