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Twitter Gets Caught With “Information Arbitrage”

Last Wednesday, Twitter CFO Anthony Noto was speaking to a financial analysts’ conference. These are important for any public company, but they’re hardly the kind of speaking engagement that would usually toss a company into the middle of what’s being called a “user revolt.”

But it was. At the event, Noto gave the clearest sign to date that Twitter is interested in moving to a feed that’s automatically sorted  and prioritized by “relevance,” which is similar to the move Facebook made to an algorithmic “Top Stories” feed.

shutterstock_215656729From the Wall Street Journal’s coverage of the conference:

“If you think about our search capabilities we have a great data set of topical information about topical tweets,” Noto said. “The hierarchy within search really has to lend itself to that taxonomy.” With that comes the need for “an algorithm that delivers the depth and breadth of the content we have on a specific topic and then eventually as it relates to people,” he added.

The WSJ’s headline? “Twitter Puts the Timeline on Notice and Hints of Group Chats.” The next up was widely-read tech news and opinion site GigaOm, which fanned the flames with its headline “Twitter CFO says a Facebook-style filtered feed is coming, whether you like it or not,” and the reaction followup “Many users are outraged at the idea that Twitter might use an algorithm to filter their feeds.” Then, the rest of the world followed. Literally. When Indonesia’s Jakarta Post is headlining “Uproar Over Talk of Tampering With Twitter Stream,” you’ve got a lot of catching up to do.

Twitter CEO Dick Costolo (@dickc) tried, responding (of course) on Twitter:

@mathewi @om he never said a “filtered feed is coming whether you like it or not”. Goodness, what an absurd synthesis of what was said.

But the damage was done. And there was damage, because the most that any other Twitter executive had said to date about timeline filtering is that they “wouldn’t rule it out,” so Noto had, in fact, made news.

While an audience of financial analysts were probably quite pleased to hear this news – most analysts assume that a filtered timeline is a prerequisite for serious money-making at Twitter, which can then sell front-of-the-line access to that timeline, as Facebook does with “boosted posts” – it was unwelcome news to the service’s users. Unscientific polls in the past few days show an overwhelming aversion to the idea among Twitter’s user base. Twitter’s communications teams are now in damage control mode, in the unenviable role of trying to put social media-driven outrage back in a bottle.

This entire situation is an example of what I call “information arbitrage” when I talk with clients about the risks of attempting to communicate just with one defined audience. While arbitrage in finance is the process of profiting when something is priced differently in two different markets, information arbitrage in communications is leveraging one group of stakeholders that has more or different information than another group.

In this day and age of instant communication, anonymous leaks and social media, it’s increasingly dangerous for any organization to assume that it can give early access to information to any but the most defined and controlled inside group. Even the traditional “employees-only” announcement, thanks to social media and “anonymous tips” drop boxes at media outlets, is becoming increasingly public. While 10-15 years ago we would develop tiered and cascading communications plans for noteworthy announcements with specific key messages, today we increasingly work under the assumption that any information we give to one individual can immediately be shared with every possible stakeholder, potentially without our critical messaging or context.

That’s what happened to Twitter – their follow-on messaging emphasized how any timeline changes would be announced, tested, revised based on user feedback, etc. But they were playing catch-up to “OMG Twitter’s going to filter our timelines” in 140 characters or less, all thanks to a CFO who might be an expert at financial arbitrage, but got caught moving the wrong way by information arbitrage enabled by his own company’s product. Financial analysts might have been ready to hear that news from Twitter, but his users were listening as well.


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