Twitter's Ashes: How Bluesky Challenges X and Threads

• If Bluesky continues to attract users at a rapid pace, it could be on the brink of a significant shift.
• COO Rose Wang stated that although Bluesky currently has no immediate plans to establish an online ad business, the company is receptive to the idea as long as it does not result in an invasive user experience.
• According to CEO Jay Graber of Bluesky, the app's decentralized and open nature makes it "billionaire-proof" because users have the ability to take their data elsewhere at any moment, as stated on CNBC's "Money Movers."

The introduction of millions of people to Bluesky occurred during a high-profile U.S. presidential election.

Since Election Day, Bluesky, a micro-blogging startup, has gained 8.7 million new users, indicating consumer demand for an alternative to Elon Musk's X and Meta's Threads. Despite being smaller than its larger social media counterparts, Bluesky now has over 22 million users and continues to grow without slowing down.

For over a year, Bluesky has experienced growth in its user base, as COO Rose Wang informed CNBC.

The week after the Brazilian Supreme Court temporarily suspended X in the country, 2 million users flocked to Bluesky's service.

In July 2023, Twitter temporarily restricted the number of posts users could read per day, resulting in a surge in Bluesky's activity.

The company anticipated a decline in user growth after Brazil lifted its ban in October, but the current surge in growth feels different, according to Wang.

"It's impressive when your grandma guesses what you're working on," she remarked.

If Bluesky continues to attract users at a rapid pace, it could be on the brink of a turning point, similar to the early days of Google when the search engine gained consumer interest and publicity while competing with older and larger search engines like AltaVista and Yahoo, said David Carr, a research editor at the internet analyst firm Similarweb.

According to Carr, social networks have experienced reversals, such as the decline of Myspace, which was once dominant, and its eventual loss to Facebook.

Hatched out of Twitter's nest

In 2021, during the peak of the pandemic, Wang and Jay Graber, now Bluesky's CEO, resided in a 22-person house in San Francisco with other driven entrepreneurs, including some of Anthropic's founders, an AI startup.

Graber was chosen by then-Twitter CEO Jack Dorsey to lead an internal project for a decentralized social network.

"Wang stated that she remembered Jay giving a presentation for the project lead of Bluesky, and everyone was excited about it."

The goal of Bluesky was to enable users to transfer their profiles and data to other social networks that utilize its open-source software.

Wang stated that Graber's peers supported the idea and Twitter backed it. The crucial issue was determining the optimal time to launch a new social network, she added.

Wang became a contractor with Graber and Daniel Holmgren and Paul Frazee, the project's initial members, later that year, and helped initiate an effort to develop a decentralized social network protocol that could be as large as Twitter, she stated.

In October 2021, Graber formed Bluesky Social as a public benefit corporation to continue developing the core decentralized social network technology, now called AT Protocol, and app, after asking Twitter to separate Bluesky out in a bid for independence, according to a Delaware State filing.

In November 2021, Dorsey resigned as Twitter's CEO and was succeeded by Parag Agrawal. In February 2022, Graber unveiled Bluesky PBLLC, stating that its goal is to promote the use of open and decentralized technology for public discourse.

The timing was perfect, Wang said.

In October 2022, Musk completed his $44 billion acquisition of Twitter, which he had offered to buy in April 2022. Just before officially taking over Twitter, the Bluesky team publicly revealed more information about their project and launched a waitlist for the Bluesky app.

"Wang recounted how Jay approached her and shared that there were over a million people on the waitlist in three days. She responded, "Okay, now is the time.""

In 2024, the startup Bluesky experienced multiple waves of user growth after opening its waitlist to the general public in February of that year.

In October, Bluesky revealed that it had raised $15 million in a funding round led by Blockchain Capital, increasing its total funding to $36 million, as reported by Pitchbook.

While Blockchain Capital invests in various crypto firms, Wang stated that Bluesky does not have any ties to cryptocurrency. Nevertheless, she emphasized that it aligns with the "decentralization" spirit.

Wang stated that there is no interest among Bluesky staff in having a central authority over all data.

Although Bluesky was initially a side project within Twitter, the startup has severed its final link to the original micro-blogging app. In May, Dorsey announced that he had resigned from the Bluesky board, stating in an interview that he had respect for Graber but had decided to prioritize a competing protocol called Nostr.

Dorsey stated that he believes Nostr aligns with his initial vision for the future of social media and is less bureaucratic.

"Dorsey stated that Bluesky, which was intended to promote decentralization and an open source protocol, has become a company with VCs and a board, which is not what he had intended."

In her interview with CNBC, Graber recognized Dorsey's contribution to the creation of Bluesky.

"In 2019, Jack had a vision for a better social media platform, and he chose me to build it. We are grateful for him for setting this up," she said.

The loss of Dorsey has increased Bluesky's credibility among users who value its decentralized nature and dislike Musk, Meta, and Threads' Zuckerberg.

On Thursday, Graber stated on CNBC's "Money Movers" that Bluesky's decentralized and open nature makes the app "billionaire-proof" because users have the ability to take their data elsewhere at any time.

"Graber stated that if someone bought or if the Bluesky company went down, everything would be open source. However, he emphasized that what happened to Twitter couldn't happen to them in the same ways because they would always have the option to immediately move without having to start over."

The future of Bluesky's business

Jack Johnston, a senior social innovation director for Tinuiti, stated that advertisers are interested in learning more about Bluesky's user demographics due to its increasing popularity. However, Bluesky is not providing much information about this data beyond the number of users on the platform.

Wang stated that it makes sense that Bluesky has attracted advertiser interest, but the platform's audience may have joined the current ad-free service in part because they're tired of viewing a deluge of online ads across other social apps.

Wang stated that the slides don't resonate with Gen Z.

Graber emphasized on CNBC's "Money Movers" that Bluesky does not intend to create an algorithm that solely displays ads, trapping users. Instead, their model is different.

If Bluesky continues to provide quality service, "the brands will come," Wang said, but they will "need to determine how to communicate with people authentically."

Bluesky is not currently planning to establish an online ad business, but the company is open to the idea as long as it does not disrupt the user experience. Wang cited Reddit's "community-based" advertising model as a potential way for Bluesky to pursue advertising.

Wang highlighted TikTok's boost model, which enables advertisers to promote third-party creators' organic videos as if they were in-house ads.

"Authenticity is the reason for the video's success, according to Wang. To further increase its popularity, it's recommended to boost it and ensure that the creator receives a larger share of the profits than usual."

Wang stated that Bluesky is seeking ways to assist the users who are the driving force behind the network's enjoyment and excitement.

In the future, Bluesky could develop its own payment system, allowing users to make transactions with one another, with the company taking a percentage of each transaction, according to Wang.

There's a possibility that Bluesky's monetization plans could disrupt users, according to Similarweb's Carr.

"What steps do you take to turn this into a business, and a more suspicious version of that is, 'How can I be sure that once you monetize this, you won't do it in a way that I detest?'" Carr questioned.

Bluesky CEO: Our social media platform is fundamentally different from anything else on the market.