How Bluesky rose out of Twitter’s ashes to challenge X and Threads

It only took a high-profile U.S. presidential election to introduce millions of people to Bluesky.

The micro-blogging startup said it has gained 8.7 million new users since Election Day, underscoring consumer appetite for an alternative to Elon Musk’s X, formerly known as Twitter, and Meta’s Threads. And while these larger social media platforms still dwarf Bluesky, the startup now has more than 22 million users and is not showing any signs of slowing down.

Bluesky’s surge may seem sudden, but it has been experiencing bursts of user growth for more than a year, COO Rose Wang told CNBC. 

In September, Bluesky said 2 million users flocked to the service the week after the Brazilian Supreme Court temporarily suspended X in the country for failing to appoint a local legal representative and failing to comply with the country’s content-moderation policies.

Bluesky had experienced a previous surge in July 2023 after X, then still named Twitter, temporarily limited the number of posts users could read per day.

The company expected user growth to drop off when Brazil lifted its ban in October, but in the wake of the election, the growth surge Bluesky is on now feels different, Wang said. 

“It’s just cool when your grandma is like, ‘Oh, I know what you’re working on,'” she said. 

Bluesky could be on the verge of a turning point if it continues rapidly attracting users, said David Carr, a research editor at the internet analyst firm Similarweb. The app’s buzz is akin to the early days of Google when the search engine began attracting consumer interest and publicity while fending off competition from older and larger search engines such as AltaVista and Yahoo, Carr said.

“We have seen these reversals, at least early in the history of social networks,” Carr said, noting that the once-mighty Myspace eventually lost to Facebook.

During the heart of the pandemic in 2021, Wang and Jay Graber, now Bluesky’s CEO, were living in a 22-person house in San Francisco along with other ambitious entrepreneurs, including some of the founders of Anthropic, the artificial intelligence startup.

At the time, then-Twitter CEO Jack Dorsey was looking for somebody to lead an internal project for a so-called decentralized social network, and he chose Graber.

“Jay was being interviewed for project lead of Bluesky, and I remember she gave the presentation to our house,” Wang said. “We’re all like, ‘How cool.'”

The premise behind Bluesky was that users would be able to take their profiles and data on the app and share it across other social networks that incorporate its open-source software.

Graber’s peers were supportive of the idea and she had Twitter’s backing, Wang said. The key question was, when is the right time to introduce a new social network to the market, she said.

Wang joined Graber and the project’s other initial members, Daniel Holmgren and Paul Frazee, as a contractor later that year and helped kick off an effort to learn how to build a decentralized social network protocol that could be as large as Twitter, she said. 

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

Dorsey stepped down as Twitter’s CEO and was replaced by Parag Agrawal in November 2021. Graber publicly revealed the now-incorporated Bluesky PBLLC in February 2022, saying, “Our mission is to develop and drive large-scale adoption of technologies for open and decentralized public conversation.”

The timing was perfect, Wang said. 

Musk offered to buy Twitter in April 2022, and the $44 billion acquisition was completed in October 2022. Just days before Musk officially took over Twitter, the Bluesky team publicly unveiled more details about their project and rolled out a waitlist for the Bluesky app. 

“I remember Jay coming to me and saying, ‘Hey, guess how many people are on the waitlist? Like a million people over three days,'” Wang said. “I was like, oh, okay, now is the time.”

In 2023, landing an invitation to Bluesky was all the rage for eager social media users, and the startup’s decision to open up its waitlist to the general public in February 2024 set it up for the multiple waves of user growth that year. 

Bluesky announced in October that it raised $15 million in an investment round led by Blockchain Capital, bringing the startup’s total funding to $36 million, according to Pitchbook.

Although Blockchain Capital invests in several crypto companies, Wang said Bluesky has no association with cryptocurrency. She said, however, that it shares the spirit of “decentralization.”

No one at Bluesky is interested in having “a central authority in control of all your data,” Wang said.

Despite Bluesky starting as a side project within Twitter, the startup has lost its last connection to the original micro-blogging app. In May, Dorsey revealed that he left the Bluesky board, saying in an interview that while he respects Graber, he decided to shift his focus on a competing protocol called Nostr. 

Dorsey said he believes Nostr is more in line with his original vision for the future of social media and less bureaucratic.

“Everything we wanted around decentralization, everything we wanted in terms of an open source protocol, suddenly became a company with VCs and a board,” Dorsey said of Bluesky. “That’s not what I intended to help create.”

Graber acknowledged Dorsey’s role in Bluesky’s origin story in her interview with CNBC.

“In 2019, Jack had a vision for something better for social media, and so that’s why he chose me to build this, and we’re really thankful for him for setting this up,” she said. 

Losing Dorsey has also given Bluesky more credibility among users, especially those who believe in the app’s decentralized nature and want nothing to do with Musk, Meta and Threads’ Mark Zuckerberg, or some other billionaire.

Speaking with CNBC’s “Money Movers” on Thursday, Graber said Bluesky’s decentralized and open nature makes the app “billionaire-proof” because users can take their data elsewhere at any moment. 

“If someone bought or if the Bluesky company went down, everything is open source,” Graber said. “What happened to Twitter couldn’t happen to us in the same ways, because you would always have the option to immediately move without having to start over.”

The future of Bluesky’s business

Advertisers have taken note of Bluesky’s rising popularity and want to know more about its user demographics, said Jack Johnston, a senior social innovation director for the digital marketing agency Tinuiti.

“It’s the No. 1 question that a lot of brands are asking for, and for better or worse, Bluesky is not publicizing much about that data beyond just the volume of users coming to the platform,” Johnston said.

It makes sense that Bluesky has attracted advertiser interest, Wang said, 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.

“I just don’t think that that slides with Gen Z,” Wang said.

Graber echoed the point on CNBC’s “Money Movers,” saying Bluesky is “not going to build an algorithm that just shoves ads at you, locking users in. That’s not our model.”

If Bluesky continues providing users a quality service, “the brands will come,” Wang said, but they will “have to figure out how to talk to people authentically.”

There’s no immediate plans for Bluesky to build an online ad business, Wang said, but the company is open to the idea as long as it’s not an intrusive experience. She pointed to Reddit’s “community-based” advertising model, in which companies can run online ads tailored to match the interests of users of a particular subreddit, as an example of how the startup could potentially pursue advertising.

Wang also pointed to TikTok’s boost model, which advertisers can use to promote the organic videos of third-party creators as if they were in-house ads.

“The video is doing well because it’s authentic,” Wang said. “Just boost that video and then make sure that the creator gets a much bigger cut than they’re normally getting.”

Bluesky is looking for ways to support the users “who are actually the ones making the network awesome and fun,” Wang said.

It’s also possible that in the “mid to long term” Bluesky could build its own payments platform that would allow users to pay one another, with the startup taking a cut of each transaction, Wang said. 

Despite Bluesky’s buzz, there’s a chance that the startup’s eventual monetization plans could upset users, Similarweb’s Carr said. 

“How do you go about making this a business, and a more suspicious version of that is, ‘How do I know that once you monetize this, that you’re not going to do it in a way that I hate?'” Carr said.

Watch: Bluesky CEO: Our platform is ‘radically different’ from anything else in social media