Twit­ter hack ex­poses the firm’s broader dys­func­tion

Dorsey’s dual role is kin­dling for al­le­ga­tions of a lead­er­ship vac­uum at Twit­ter

The Daily Telegraph - Business - - Business Comment - James Tit­comb

The most re­veal­ing thing about last week’s as­ton­ish­ing Twit­ter hack was that Wall Street barely raised an eye­brow. In the space of a few dis­as­trous hours, 130 ac­counts be­long­ing to some of the world’s most pow­er­ful peo­ple, in­clud­ing Barack Obama, Joe Bi­den and Bill Gates, were hi­jacked, os­ten­si­bly to pro­mote an at­tempt to steal cryp­tocur­rency from gullible users.

We should be thank­ful the hack­ers do not ap­pear to have more sin­is­ter mo­tives, be­cause it is dif­fi­cult to ex­ag­ger­ate the dam­age such a hack could have caused in the wrong hands: Twit­ter has caused enough stock mar­ket chaos and diplo­matic crises for us to know that.

And yet, the day af­ter the hack, shares fell by a measly 1pc.

There are two ways to in­ter­pret in­vestors writ­ing off Twit­ter’s worst ever hack as a non-event – one more char­i­ta­ble than the other. The first is that the mi­croblog­ging ser­vice is re­silient enough, its pull so strong, that it can brush off this latest con­tro­versy.

The less gen­er­ous read­ing is that ex­pec­ta­tions for Twit­ter are now so low that it is dif­fi­cult for them to drop much fur­ther; the com­pany so of­ten man­ages to get it­self in such mud­dles that it would be sur­pris­ing if in­ci­dents like this did not hap­pen. Un­for­tu­nately, there is plenty of ev­i­dence for the lat­ter ex­pla­na­tion. Shortly af­ter last week’s hack, it emerged that the breach was an in­side job: a rogue em­ployee was able to change the email ad­dresses as­so­ci­ated with the af­fected ac­counts, dis­able ad­di­tional se­cu­rity mea­sures and re­set pass­words, all with­out the vic­tims know­ing.

The sys­tem is de­signed to al­low peo­ple locked out of their ac­counts to eas­ily re­turn to them, but in hind­sight was a clear vul­ner­a­bil­ity, pri­ori­tis­ing con­ve­nience over se­cu­rity. This should be a car­di­nal sin for any net­work that re­lies on high-pro­file fig­ures for the best con­tent, but par­tic­u­larly for Twit­ter, which has his­tory here.

In 2017, a con­trac­tor who worked for an out­sourc­ing com­pany that han­dled moder­a­tion was able to de­ac­ti­vate Don­ald Trump’s Twit­ter ac­count, seem­ingly with­out over­sight (se­cu­rity mea­sures taken af­ter this are why Trump was, thank­fully, spared in last week’s hack). And last year, pranksters were able to tweet from the ac­count of Jack Dorsey, the com­pany’s chief ex­ec­u­tive, af­ter abus­ing a method for post­ing by text mes­sage. Twit­ter also re­mains on pro­ba­tion from Amer­ica’s Fed­eral Trade Com­mis­sion af­ter se­cu­rity lapses a decade ago that in­cluded giv­ing hack­ers “the abil­ity to send out phoney tweets from any ac­count”.

The FTC fined Face­book $5bn (£4bn) last year for break­ing a sep­a­rate agree­ment, so the pos­si­bil­ity of fur­ther scrutiny should worry Twit­ter. Any cor­po­rate fall­out is likely to be tem­pered by the lim­ited na­ture of the dam­age: slightly more than $100,000-worth of Bit­coin ended up in the hacker’s ac­count. A flash mar­ket crash, sim­i­lar to the 143-point fall on the Dow Jones in 2013, when a hack­ers sent a mes­sage from an As­so­ci­ated Press ac­count say­ing ex­plo­sions had been re­ported at the White House, would have meant big­ger con­se­quences.

Maybe Twit­ter did not ask to be­come the news­wor­thy ser­vice it has be­come. Don­ald Trump and Elon Musk, among the most high­pro­file users of the ser­vice, have been more re­spon­si­ble for that. But the com­pany has cer­tainly ben­e­fited from this trend, ap­par­ently with­out step­ping up its re­spon­si­bil­ity.

This speaks to a broader dys­func­tion. Twit­ter has a part-time chief ex­ec­u­tive in Dorsey, who spends after­noons run­ning pay­ments com­pany Square (a much greater source of his wealth), and who be­fore the pan­demic had planned to re­lo­cate to Africa for much of this year.

Del­e­ga­tion is no bad thing when things are run­ning smoothly. When they are not, Dorsey’s dual role is kin­dling for al­le­ga­tions of a lead­er­ship vac­uum at Twit­ter.

The com­pany ap­pears to flit be­tween ini­tia­tives. In De­cem­ber, Dorsey said it planned to “de­cen­tralise” the ser­vice, mak­ing it more akin to the open stan­dard of email. Re­cently, it emerged that it is con­sid­er­ing a paid-for sub­scrip­tion ser­vice, though the com­pany con­fus­ingly back-ped­alled on the idea once it be­came pub­lic.

Ear­lier this year, the ac­tivist in­vestor El­liott Man­age­ment launched a cam­paign at Twit­ter, say­ing Dorsey should leave if he was un­able to de­vote him­self to the job full time.

Af­ter a cam­paign from em­ploy­ees, the two sides even­tu­ally came to a com­pro­mise that was largely seen as a vic­tory for the chief ex­ec­u­tive, in­clud­ing by al­low­ing him to stay in charge.

But Dorsey is far from in the clear. El­liott’s ag­i­ta­tors re­main on its board, and the com­pany has a new chair­man in Pa­trick Pichette, the for­mer Google fi­nance chief who has been tasked with set­ting up a board eval­u­at­ing the com­pany’s struc­ture. In get­ting El­liott to back down, Dorsey also signed up to ag­gres­sive growth tar­gets.

On Thurs­day, Twit­ter’s quar­terly fi­nan­cials will give some sign as to whether it is on the road to hit­ting them. The pan­demic has seen a broad ad­ver­tis­ing slow­down, but even so the com­pany’s busi­ness is not in great shape, hav­ing grown much slower than Face­book’s in the first three months of this year.

It will not take much for ques­tions about Dorsey’s lead­er­ship to re­turn. For some, the fact that his po­si­tion is ques­tioned this of­ten may be enough to make it un­ten­able.

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