Twitter’s catastrophic hack will put pressure on Dorsey
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 1%.
There are two ways to interpret investors writing off Twitter’s worst hack yet 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 e-mail addresses associated with the affected accounts, disable additional security measures and reset passwords, all without the victim knowing. The system is designed to allow people locked out of their accounts to easily return to them, but in hindsight it was a clear vulnerability, an instance of 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 in 2019, 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 in 2019 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 (R1.7m) ended up in the hacker’s account. A flash market crash, similar to the 143point 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. Trump and Elon Musk, among the most high-profile 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 his 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 2020. 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 e-mail. 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 in 2020, 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 chairperson 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 indication 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 2020.
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.