Twilio can’t seem to catch a break. After enjoying the meteoric rise in SaaS stocks during the pandemic, over the past months Twilio’s stock has continued to slide as the company slowed hiring, closed offices, and limited travel in July and then announced restructuring plans that would lay off 11% of its workforce in September.

Now Twilio’s stock is down again after providing a weaker outlook than expected last week, reaching its pre-pandemic lows. The company forecast $3.80 billion to $3.81 billion revenue for the year, which falls short of its 30% annual growth target. It’s a drastic shift for a company that was growing at an explosive 50%+ over the past several years thanks to demand for its communications APIs.

Twilio is still growing, of course, but its trajectory has changed. While macroeconomic factors are partially to blame, the company also made a number of internal missteps, chief operating officer Khozema Shipchandler told Protocol in a recent interview. During Twilio’s investor day on Thursday, company executives admitted they tried to grow the company too quickly, adding excessive head count, failing to integrate sales teams properly, and struggling with the trade-offs between profitability and growth.

Now Twilio is trying to course correct, reducing sales and marketing spending, while also shifting future hiring to lower-cost geographies, closing offices, and reducing stock-based compensation. All of this restructuring is estimated to reduce operating expenses by more than $300 million, while putting the company on track to reach its goal of profitability next year.

In our conversation Shipchandler discussed some of the mistakes Twilio made in its quest for growth and how the company plans to move forward.

This conversation has been edited and condensed for clarity.

Obviously Twilio had some pretty crazy growth over the past years, and now it's slowed down. Do you think part of that is just getting bigger as a company and growing or do you think Twilio grew a little bit too fast?

I think you have a few dynamics. I think the company's always kind of prided itself on being a high-growth company. And if you think about sort of the roots of the company, right, we started in voice and then we quickly went into SMS, and SMS kind of took off at the same time that the company really took off. And I wouldn't say that was really a coincidence, right? The company promulgated a really easy-to-use SMS API capability, businesses realized that customer engagement was really important, and communications are one of the principal ways in which you achieve that. And it turns out that a combination of using voice and email and, increasingly, especially SMS, were just great ways to do that. So the company really was a beneficiary of what I would just characterize as secular growth, basically.

And then COVID came along and all of a sudden we're in various forms of lockdown and businesses basically had to figure out almost immediate ways to continue to engage with customers without the benefit of an in-person interaction, right? And if you think about it, just through the lens of your experience as someone that went through COVID and the global pandemic, here we are, we're sitting at home, but we still have to interact with physicians, we still have to interact with our banks, we still have to interact with the day-to-day stuff like getting groceries and getting deliveries from retailers, vis-a-vis ecommerce. And so [Twilio was a] big beneficiary during COVID as a result of COVID dynamics.

So fast forward then to today. Wow, tough macroeconomic backdrop, things are really happening very quickly in the landscape. I think crypto was kind of the first to go, then social media was kind of the next to go. I think now we're seeing a lot of the bigger guys, we're certainly not immune from that either, really starting to indicate that some of that growth may be coming down. But make no mistake, we're still a very high grower; we intend to be for some time. The financial priorities of the company are not really all that different. The customer engagement opportunities are no different. We're just looking at a different time.

I know you had the 30% [annual revenue target] at the beginning of the year. Are you pulling that annual revenue growth target completely?

We're pulling it for the foreseeable future. I mean, the thing is, even just 90 days ago we put up a pretty strong quarter. We published our third-quarter results and not even 90 days but 30 days ago we put up our third quarter results, and we grew 32% year-on-year organically. And [in] just 30 days in the world has really changed quite quickly. And so for us, we've been saying for a while that we can grow for a long period of time at 30%. All of a sudden you've got tons of macroeconomic forces, and it just didn't make sense in a world in which consumer-on-demand and social and retail is really feeling the effects of, hopefully not a prolonged recession, but all the same, something significant macroeconomically. It didn't make sense to keep putting out that number. What we did say was that we could continue growing at 15% to 25% over the medium term. I personally think that we could be a bit better than that, as the economy recovers. That’s the way that these things tend to go but that's the guidance that we put out there.

What about for next quarter? I think guidance is around 18% to 19% growth. What do you think accounts for that sort of muted growth?

It’s macroeconomic. I mean, it's in that strike zone of 15% to 25% that we'd sort of put out in the medium term. The thing is, we see pretty clear signals that something's happening in the macroeconomic environment right now across a number of different industries, some of which we called out in our investor day. And I think what's really tough is that when you're in a usage-based business, you don't have the benefit of a floor, if you will, that you do with a SaaS business. And so the ups that we enjoyed during COVID when usage was really taking off, we were beneficiaries of that. On the other side, it doesn't feel as great but we're still growing really fast in spite of the economic headwinds that we're facing, and I think as the economy recovers, we'll be one of the first out.

One thing that was talked about [at the investor event] a decent amount was the go-to-market strategy and how that might be shifting. And then also some of the challenges with integrating Segment and having different sales teams and different sales processes. Can you talk a little bit about what those changes will be, why it's important and what that will enable and drive for Twilio?

Sure. So if you go back, not to give you a history lesson, but if you go back several years, the company actually didn't have that many salespeople. If you go back to 2015, 2016, that seems like eons ago now, but we really didn't have that many salespeople back then. And the reason was the heritage of the company was really product-led growth. And so there was much more of a self-serve capability. We could still do this, by the way, but you and I would go to the website. We would find that we really like the APIs, we find that it's really easy to use, we swipe a credit card once we got through the free packets, and our usage would just ramp. It worked out a little bit differently for companies but pretty much the same concept.

I think what's really tough is that when you're in a usage-based business, you don't have the benefit of a floor, if you will, that you do with a SaaS business.

And then I think what we realized was, “Wow, we're probably limiting ourselves by doing it entirely self-serve, we should also have an outbound sales force.” And so we hired executives that were scaled executives in that regard. They knew how to do this sort of thing. They brought in experienced executives in sales and we grew out a big sales team. And they served a variety of segments, a variety of geographies, and in a handful of instances they served certain verticals.

And I think the gist of it is, that it just got too big too fast, and that's what you've seen happening a lot in tech recently. And so it made sense I think, a) for us given the fact that we knew the future of the company would be much more around Segment and Flex, and I'll come back to Segment in a second. And b) we felt like there was an opportunity to drive a lot more efficiency and effectiveness in the general sales force and we'd be able to better align incentives and stuff like that. So basically what we did was we went into the restructure and said, “Okay, how do we get back to our roots?” How do we drive more product-led growth, how do we still deliver a high service capacity for customers, but let them do it in a more self-serve fashion, because the experience is so great, the documentation is so great, the APIs are so easy to use, which is honestly the roots of the company to begin with.

As it relates to Segment specifically, basically what happened was, we bought the company a couple of years ago, midway through the integration we decided to integrate the sales teams [and] thought that would be a great idea. We would take a relatively small sales force with Segment, combine it with a relatively large sales force in Twilio. We felt like adding an additional product into the bag of the sellers, what could possibly go wrong? And it didn't work out so great, frankly.

And the reason in large part was that you just have a very different buying persona in one versus the other. And even in Flex for that matter. The vast majority of our selling capacity is aimed at the developer or some sort of enterprise buyer who's decided that Twilio has now become a significant cost center in their business and so they want to manage it a little bit differently, probably the CIO. In the case of Flex, it's very much customer service or the head of operations. And in the case of Segment, you're calling on the CMO and she has a different set of needs and interests than [do] those two other constituencies. And the reason it worked so well with Segment was because they had very specialized folks who could call on that CMO and meet her needs. And so basically what we decided after going through a couple quarters of it was, we weren't getting the traction that we expected, that the buying persona distinction that we initially saw was actually going to be hard to overcome in the short term. And we pivoted back to the model that was.

The unfortunate thing that happened in the middle of that is that we had some relatively high attrition within the Segment sales force. And so, as of today, we've hired back all the capacity. We've got to ramp them now, but I think we will and I think we'll continue hiring more Segment salespeople.

And how are you thinking about geography now? I know [Twilio] is shifting to remote first and they mentioned hiring in lower-cost geographies. I know some companies are doing fixed pay regardless of geography.

Well, I don't think anyone's doing fixed global pay. That would be new to me. I think you do have companies that are doing kind of fixed U.S. pay or I think most of them are doing something more akin to what we do, which is really flattening out the pay tiers within the U.S. I think it used to be that — I grew up in Indiana so I'll pick on my home state — someone that was situated in Indiana versus in California there's a pretty significant pay differential because of cost of living, basically. I think post-pandemic, what everybody said is basically, “Look, I can live and work and be effective anywhere, and why should I be penalized in my pay because of that?” I think that does make sense to a certain degree, I do think there are cost-of-living considerations. So we've operationalized that by thinning out the pay tiers, so that there's just fewer discrepancies place to place. So that's in the U.S.

I think the gist of it is, that it just got too big too fast, and that's what you've seen happening a lot in tech recently.

I'm a big supporter of remote work. We're kind of a remote-first company now. I think that's a nice move. I think it's great in terms of being able to attract diverse talent as well, which is really important to us as a company. I think, globally, we've always had sort of a global footprint, we want to grab the best talent wherever it is in the world. I think it's also helpful for continuing, especially in engineering, on a development cycle that's kind of around the clock. And then I think in certain functions like [general and administrative], customer support, stuff like that, there are just lower-cost places in the world to do certain things that just don't require the same cost footprint, and so I think you get some labor arbitrage there.

Hello and welcome to Protocol Policy! Today, we’re talking about the lessons Elon Musk didn’t learn from social media’s early days. Plus, Congress eyes a lame-duck pass at antitrust and social media platforms get poor marks for combatting election misinformation.

​Elon’s Twitter time warp

There was a time, around 2014, when even Mark Zuckerberg realized moving fast and breaking things was a bad idea.

Standing on stage at Facebook’s developer conference that year, Zuckerberg declared the company’s new motto was “Move fast with stable infrastructure” — an acknowledgement that Facebook had outrun its scrappy startup days and that even the most minor decisions had unintended consequences. It’s all fun and exploding watermelons until someone livestreams a massacre.

Now, Elon Musk is about to learn that lesson all over again.

Under Musk, Twitter is reverting to an earlier era of social media, and not just because of Musk’s outdated views on online speech. Musk is also returning Twitter to a time when its singular focus was on making money, ensuing chaos be damned.

• Since seizing power of Twitter a little over a week ago, Musk has hastily slashed staff and forced whoever’s left to spin up new products overnight like some sort of business school brainstorming session on steroids.
• As evidence that Twitter’s new leaders may not be thinking all of their decisions through as carefully as they should, Twitter is reportedly now trying to hire back some of the people it fired last week.

Twitter is once again stumble-sprinting toward new revenue-generating products, with seemingly little regard for how they could be abused. Consider what Twitter’s been working on — and is rumored to be working on — this last week alone:

• A new $8 Twitter Blue that gives subscribers priority in replies and search, and could very well skew the power balance on Twitter toward only those with the means and inclination to pay.
• A new OnlyFans clone that Twitter employees reportedly had just three days to vet for risks, despite a similar product earlier being shelved over concerns about child sexual abuse material.
• A Vine reboot that creates an entirely new surface area of risk in a medium — video — that’s much harder to police than text, at a time when Twitter just lost 15% of its Trust and Safety team.
• A paid direct-messaging feature that seems destined to be used for targeted attacks against public figures.

At this point, Musk shouldn’t be naive to the risks in the way Twitter’s and Facebook’s founders once were. But Musk has never let a little — or a lot of — risk stop him. Take what he’s done with Tesla:

• This is a company that publicly launched a feature called Full Self-Driving, which, by Tesla’s own admission, does “not make the vehicle autonomous.”
• But in the face of a steady stream of lawsuits, investigations, and even fatalities, Tesla hasn’t backed down from the branding.

Tech platforms have been rightly criticized for becoming too risk-averse in their middle age — for adopting tortured decision-making processes that make them too slow to respond and too fearful of political backlash. Moving fast and building stable infrastructure hasn’t exactly panned out for Zuckerberg.

But in his frenzied quest to pay back the $13 billion in debt Twitter took just on, Musk is turning the knob the other way entirely, substituting careful consideration for a cash grab. If history is any indication, don’t be surprised if a lot of things get broken.

— Issie Lapowsky (email | twitter)

​In Washington

The White House told Bloomberg it plans to push Congress to pass the tech antitrust legislation during the lame-duck session.

Democrats are worried about YouTube allowing the spread of Spanish-language misinformation ahead of the midterm election. In a letter to YouTube CEO Susan Wojcicki, a group of congressional Democrats cited “a disturbing rise in the prevalence of abortion-related mis/disinformation targeting Latinas across social media platforms.” Sens. Amy Klobuchar, Ron Wyden, and Tim Kaine signed the letter alongside Reps. Joaquin Castro and Judy Chu.

The Justice Department shut down an illegal e-book distributor that recently surged in popularity through TikTok. The agency took the domain, but it’s still possible — and perhaps even likely — for the service to pop up elsewhere on the internet, BleepingComputer reports.

The top members of the House committee that oversees consumer protection expressed “serious concern” with Apple and Google allowing TikTok on their respective app stores. In letters to both companies, Reps. Jan Schakowsky and Gus M. Bilirakis called TikTok “particularly egregious,” though they also cited apps operated by Meta as allowing platforms to “closely surveil users while they are using in-app browsers.”

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​In the courts

The Department of Justice charged two former executives associated with MoviePass with fraud. The case against Ted Farnsworth and Mitch Lowe alleges they attempted to defraud investors by providing “materially false and misleading representations” that artificially inflated the company’s stock price.

The Supreme Court is hearing arguments on whether companies subject to in-house tribunals at the FTC and SEC can challenge the process before final judgments. The issue is bureaucratic but could change how major federal regulators operate.

Apple settled a lawsuit against a former employee working on design. Apple accused the engineer, Simon Lancaster, of sharing sensitive trade secrets with journalists.

​On Protocol

The Department of Energy is actively exploring bidirectional charging, which allows EVs to send energy back into the grid and has potential benefits for improving system reliability and cost.

COP27, taking place in Egypt, will likely focus on building a framework for rich countries to pay for climate damages in developing countries. This will be the 27th iteration of what's known as the Conference of the Parties, a United Nations climate change conference.

Around the world

China is considering relaxing its zero-COVID-19 approach, which led to strict, weekslong lockdowns in some cases, according to The Wall Street Journal.

Russia has reactivated some fake accounts ahead of the midterm election, The New York Times reports. Those accounts, operating on social media services such as Gab and Parler, are reportedly attempting to sway public opinion on the validity of the electoral system as well as American support for the war in Ukraine.

​In the media, culture, and metaverse

More updates from Twitter:

• Twitter started and then stopped rolling out an $8-per-month verification program under Twitter Blue. The company pushed a software update that told customers they can get a blue check mark “just like the celebrities, companies, and politicians you already follow.” But some Twitter managers maintained the update hadn’t gone live yet, and then the company reportedly decided to delay the rollout until after midterms, The New York Times reported. Musk claims Twitter will suspend imposters who use the blue check to scam others.
• Twitter has reportedly asked some of the laid-off employees to return. Some of the teams most impacted by the layoffs include communications, ethical AI, research, and tweet curation, according to The Verge.
• Twitter founder Jack Dorsey took to Twitter to apologize for growing the company too quickly.
• A group of Twitter employees filed a preemptive lawsuit against the company, warning of violations of the WARN Act. However, because Twitter seems to have given employees sufficient warning and severance, the WARN Act likely won’t apply.

Meta and Twitter haven’t delivered on their promises to combat election misinformation, according to The Washington Post. At least 26 midterm election candidates posted inaccurate election claims that weren’t adequately addressed by social media companies according to their own principals, based on analysis conducted by The Post.

Meta is reportedly considering broad layoffs that could affect thousands of workers. The company has never before enacted such large reductions in head count. Meta could make announcements to its roughly 87,000 employees on Wednesday.

​In data

90%: That’s roughly the approval rating of El Salvator’s president, Nayib Bukele, whose bitcoin experiment has largely gone awry, according to a recent Bloomberg report. In spite of the crypto struggles, Bukele has won support for his crackdown on gang violence among other domestic issues. In a September article for Bitcoin Magazine, Bukele touted El Salvador’s rise in GDP, employment, and exports — while maintaining that the bitcoin experiment has largely worked.

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End of the gold rush

What comes after the gold rush? In the case of bitcoin mining, it’s a lot of excess capacity. The top bitcoin-mining operations are selling capacity at a 77% discount compared to a year ago, The Wall Street Journal reported.

Thanks for reading — see you Wednesday!

BlockFi has introduced a new digital assets interest product for accredited investors, after previously agreeing to shut down a yield-paying crypto product that the SEC said was illegal.

---

Crypto lending has come under scrutiny by the SEC and state regulators, many of whom have said that crypto lending products are securities, some with substantial risk, and should be regulated as such.

In February BlockFi agreed to pay a $100 million penalty to the SEC for offering and selling its BlockFi Interest Accounts product.

The new product is initially open to U.S. accredited investors only. It will be open to some customers by the end of the year and all U.S. customers at the start of 2023.

The product will have "competitive interest rates" on 15 digital assets including bitcoin and ether and no minimum investment.

Earlier this year, BlockFi faced a rapid downturn in the crypto markets and laid off 20% of its staff. It also entered into an agreement with FTX in which the crypto exchange provided BlockFi with a $400 million credit line and in return gained an option to buy BlockFi.

The purchase price was reportedly dependent on certain performance milestones, including the SEC approval of this new interest product, which would boost the purchase price by $25 million.

Good morning, and welcome to Protocol Fintech. This Monday: the real estate slowdown hits proptech, crypto arbitrage, and JPMorgan Chase’s blockchain test.

Off the chain

You’ve heard of checking accounts: How about a blue-check account? Elon Musk’s plan to charge users for verification has at least one fan: former Twitter COO Anthony Noto, who offered to cover SoFi customers’ $8 monthly fees. The thing is, $96 a year to attract or retain a customer isn’t that much when you consider that SoFi spent $19.5 million on “member incentives” last year, more than it spent on direct advertising. The only thing I wondered was whether it seemed a bit vulturous to be making the pitch as layoffs loomed over Noto’s former colleagues.

— Owen Thomas (email | twitter)

It’s getting real (estate)

The real estate market has been hard hit by inflation and rising interest rates, as home buyers have pulled back in the face of increasingly unaffordable mortgage payments. Retail mortgage originations dropped 90% year-over-year at Wells Fargo, which is now reportedly contemplating layoffs. Online lenders and proptech startups are facing similar pain.

For companies that rely on the housing market, it’s a tough road ahead until interest rates and the housing market turn.

Zillow is betting on becoming a super app. The home-prices site beat analysts’ estimates for the third quarter, but its fourth-quarter outlook fell short. It also laid off 300 employees.

• Zillow has finally finished selling off the homes that were part of its iBuyer experiment. It announced a painful exit from that business a year ago.
• Zillow is now focused on building a “super app” that includes buying and selling services such as 3D tours for consumers. Zillow has a “relatively mature” advertising business, and its new approach has potential, but it’s too early to say if it will succeed, said BTIG’s Jake Fuller.
• While the housing market is not pretty now, Zillow does have some bright spots, Fuller added: “[W]e would note that it is relatively well-positioned given a strong balance sheet, free cash flow, and a valuation that isn't particularly challenging.”

Rocket’s mortgage operation is no longer soaring. Refis boosted Rocket last year: It processed more than double the volume of such loans than any other lender. But refinancings have cratered with soaring interest rates this year.

• Rocket is focusing instead on new home loans and cash-outs. In the third quarter, Rocket’s mortgage loan origination was $25.6 billion, down 71% from $88.05 billion in the year-ago period.
• CEO Jay Farner told analysts that Rocket’s size will enable it to survive the tough market: “As we are seeing significant capacity will continue to come out of the system, further industry consolidation will take place, and those who aren't well capitalized will struggle with liquidity. In the end, only the strong will be left standing.”

Opendoor faces an overhang. The iBuyer doesn’t just face a real estate downturn among consumers; it also has to take on the risk of buying and selling homes itself — the enduring challenge of its controversial model.

• Opendoor sold more homes than expected in the third quarter, but margins missed expectations as the company sold homes it bought before the downturn. That will continue to hurt margins in the fourth quarter and first quarter of 2023, according to BTIG’s Fuller. Opendoor said last week it would lay off about 550 employees.
• Opendoor has slowed down its home buying, acquiring 8,380 homes in the quarter, down 45% from the year-ago quarter, showing the limited appetite for iBuying in a difficult environment. Still, Opendoor’s new Exclusives direct marketplace product, which the company aims to make more than 30% of transactions next year, lowers its costs of selling to less than 2% of revenue compared to an estimated 2.8% this year, according to Fuller.

Real estate tech companies face a tough slog in the current environment. Until inflation and interest rates show some real signs of dropping, the companies face both the challenges of all high-growth tech companies whose stocks have been hit, as well as the effects of the real estate downturn. “They're doubly affected,” said Melody Brue, analyst at Moor Insights & Strategy.

As tech companies, their natural move is to try to innovate their way out of this. But in a high-risk environment, some consumers may want to stick to traditional real estate services from humans, Brue said. Tech can cut costs, but it’s much harder to build trust.

— Tomio Geron (email | twitter)

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On the money

On Protocol: The DOJ seized $3.4 billion in bitcoin linked to a 2012 hack of the Silk Road dark web marketplace.

The two biggest crypto exchanges are fighting. FTX experienced an increase in withdrawals after competitor Binance said it would divest its holdings of FTX’s native FTT token. FTX founder Sam Bankman-Fried and Binance founder Changpeng "CZ" Zhao are also trading barbs on Twitter.

JPMorgan Chase made its first public blockchain trade. The bank issued tokenized $71,000 as part of a Singapore central bank pilot program exploring the use of DeFi in the banking sector, then traded it for tokenized yen with Japan’s SBI Digital Asset Holdings.

Federal Reserve rate hikes will cost credit card debt holders big. The latest hike will cost Americans with outstanding credit card debt more than $5 billion in additional interest over the next 12 months, according to an estimate from WalletHub.

Wall Street had a Block party. Block closed Friday trading up 11% after reporting earnings Thursday that topped expectations. Coinbase closed up by about 5%.

U.K. rules could cut into crypto marketing. Industry leaders say a pending requirement for crypto firms to follow local ad rules could add to an already complex process.

​Overheard

Critics of an American digital dollar might be mollified by recent comments from Michelle Neal, head of the markets group at the New York Fed. “One of the most important aspects in our deliberations is that any form of a CBDC in the future would need to be intermediated,” Neal said at the Singapore FinTech Festival last week, adding that “a direct account approach would not be contemplated.” Some policymakers have resisted the idea of a U.S. CBDC if it meant the Federal Reserve creating and maintaining consumer accounts.

CFTC commissioner Kristin Johnson thinks crypto arbitrageurs are pretty skillful at their work — when they’re not outright frauds. “The uses of remarkably sophisticated trading technology in the digital asset ecosystem are, in fact, exceedingly competitive, particularly those strategies focused on capturing arbitrage gains or rents that, by definition, may be fleeting and elusive,” she said in a statement about a fraudulent crypto-arbitrage scheme.

Coming up

The AI in Finance Summit is Wednesday and Thursday in Toronto. The virtual and in-person conference is divided into Women in AI, AI in Finance, and Deep Learning tracks.

Affirm, Jack Henry, and Fidelity National Financial report earnings Tuesday. The Zacks EPS forecast for AFRM is -$0.82, where it was -$0.40 the same quarter last year. JKHY’s consensus is $1.40 versus $1.38 for the same quarter last year. FNF’s consensus is $1.54 versus $2.12 for the same quarter last year.

FICO reports earnings Wednesday. The Zacks EPS forecast is $3.74 for the quarter versus $3.13 for the same quarter last year.

Toast reports earnings Thursday. The Zacks EPS forecast for TOST is -$0.22 for the quarter, and was -$0.22 for the same quarter last year.

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Thanks for reading — see you tomorrow!

When Elon Musk bought Twitter, he also bought a treasure trove of internal Slack messages. Just three days into his tenure, he exercised that access, tweeting a Slack message that Twitter safety and integrity head Yoel Roth sent in May.

The tenor of Twitter’s Slack changed overnight with the acquisition, a current Twitter employee told Protocol. Formerly outspoken employees fell silent. Submitting a tough question for “ask me anything” town halls became unthinkable.

“We definitely talked about Elon command+F-ing ‘Elon Musk,’” the employee, who requested anonymity to protect against retaliation, said. “A group of us were saying, ‘Oh shit, what did I ever say about Elon Musk on Slack?’”

Twitter did not respond to a request for comment. Slack declined to speak on the record.

In the days of the in-person office, the new company leaders may have had to set up discreet conference room confabs to get the full workplace scoop. In the world of remote work, Slack and Microsoft Teams messages are accessible and ripe for the picking. Idle gossip in the hallway has turned into direct messages to your team of co-worker confidants; personnel changes, once announced during town halls, became blasts in the #general channel. The good, bad, and ugly of the working world lives inside a single, searchable workplace app — which is why Slack, often the chosen tool of Silicon Valley, becomes the main character in workplace meltdowns.

Slack creates transparency, but with that transparency comes an inherent lack of privacy. Nothing can stop co-workers from taking screenshots or bosses from infiltrating private channels. In Twitter’s case, the new leadership is getting a taste of the Slack panopticon as well — engineers from Musk’s other companies (which use Teams instead of Slack) initially created public channels that Tweeps quickly found. Slack channels are not private by default.

“I don’t think many people predicted that — which is obvious in hindsight — the new owner would start combing through past messages once the acquisition went through,” former Twitter software engineer Manu Cornet told Protocol. “I certainly wasn’t smart enough to think about that. Some might, but we’ll never know because they were smart enough to keep quiet.”

Why we expect privacy on Slack

Slack, resembling the instant messaging of our personal lives, lulls some into a false sense of security. It feels more casual and ephemeral than email.

“When you're texting a friend or co-worker versus when you're emailing somebody, you assume the texts are mostly private,” said Anshu Sharma, CEO of data privacy platform Skyflow. “That's how all these people get in trouble. Slack feels like texting to people, especially direct messages.”

But direct messages and even deleted messages are accessible to employers if they seek that data out. “Someone can request direct messages from Slack if they have the right administrative privileges,” said Patricia Thaine, CEO of privacy software company Private AI. “This is all within their right because there is no real privacy law protecting employee data, unless it’s health care data.” Even if a company admin set up a 90-day Slack purge, a copy of this data might be accessible to a CIO.

A cursory command+F search of public Slack channels is an easy lift, and might yield useful information. Matt Haughey, a web designer and former senior writer at Slack, said one of his first moves as a new hire at the company was to search for his own name. The effort of scouring the entirety of a Slack workspace is another story, and not worth it for most employers. Of course, Musk isn’t “most employers,” but with four other companies to run and Twitter advertisers to woo, scouring Slack likely isn’t his first priority.

“Can my boss read my DMs?” Haughey asked. “Technically yes, but it's a giant pain in the ass and you have to get a massive data dump of everything ever said, and then you have to search for just that channel or person. It's needles in haystacks.”

Despite the potential for surveillance, many tech companies have thriving Slack ecosystems. Twitter was one of them. The company has historically prized feedback and openness in its culture. “We do have a very active Slack,” the current Twitter employee told Protocol. “A lot of people say things that they probably shouldn’t say in general on a company Slack, especially not when someone like Elon Musk takes over.”

Twitter post-Musk quickly became a very different place, where uncertainty reigned and layoffs loomed. Former Twitter employee Cornet, sensing he would soon lose access to his account, created a Chrome extension allowing employees to grab important documents. He then shared the message on Slack, which was ultimately deleted from the channel. Cornet thinks that message contributed to his firing on Nov. 1 (along with his subversive Twitter comics).

One of Manu Cornet's Elon Musk comics.Comic: Courtesy of Manu Cornet

Cornet might not be the only one whose Slack messages got them in trouble. Musk has access to critical and sensitive communication that could have helped him decide who to dismiss in Friday’s layoffs, though the current employee Protocol spoke to is doubtful Slack messages played a role.

“With how massive these layoffs were, it feels like there’s no rhyme or reason to it,” the employee said. “Honestly, if he was doing that, I would have been laid off.”

Your Slack messages aren’t really yours

The law is pretty clear when it comes to workplace messaging: Companies own all communications taking place on company-sponsored platforms. Lee Adler, a professor with Cornell’s School of Industrial and Labor Relations, said while it’s illegal for companies to forbid discussion of organizing, for example, the record of those discussions still belongs to the company.

“The workplace privacy that workers might have — unless they are protected by specific laws like the [National Labor Relations Act] or an analogous state law — in the digital archives of the ‘selling’ company is virtually none, in a union or non-union company,” Adler told Protocol.

Lynne Hook, an employment lawyer who has led company investigations that dredge up employees’ messages, reemphasized that workers should have no expectation of privacy. Employers typically make this clear in employee handbooks, though Hook recommends reiterating it during live onboarding sessions too. Employers’ reach can actually extend beyond Slack and into personal text messages, depending on the legal situation.

“If employees are engaging in workplace discussions — particularly discriminatory or harrassing or illegal workplace discussions — on their personal devices, an employer can actually reach that if necessary,” Hook said.

If workers have little control, what about executives? It’s highly unlikely that outgoing leaders would decide of their own volition to delete or protect sensitive Slack data. At Twitter, a Slack setting automatically forbids employees from deleting any sent messages, according to the current Twitter employee. That policy, plus the now-moot pending litigation against Musk, means Twitter’s Slack archives likely remain untouched.

In the absence of official communication this past week, Tweeps turned to Blind and Signal for more candid conversation. They crowdsourced information from the accidentally public Slack channels and executive team calendars. Communicating via anonymized or encrypted channels is a common tactic for workers seeking privacy, especially those looking to organize their workplace. Forrester analyst Will McKeon-White recommended employees also avoid using company devices for sensitive conversations.

“If you're worried about sensitive information from your work account being shared out with the organization, that is information that probably should not have been shared on that channel in the first place,” said McKeon-White.

The Twitter acquisition will forever change the way employees at the company communicate — and should remind workers everywhere to think before you Slack. The current Twitter employee told Protocol his messages will be strictly professional from now on. He’s wary of using even Twitter DMs to share personal thoughts with co-workers.

“I have no faith that our Slack is safe,” the employee said. “[Musk] is going to have to prove us wrong there.”