Tweets For My Sweet

I am one of those people who signed up to Twitter, gave it a good bash and then left it. I just couldn't understand why a screen full of irrelevant, banal comments on nothing was adding any value to my life. I dare say I am missing the point, but I have tried and just didn't get it.

Well clearly I am in the minority. The company has not made a single bean in revenue - in fact, in the 'pure' world of tweets, the users believe that trying to 'monetise' them would be an affront and most likely drive many away. But that hasn't stopped the latest round of capital raising go ahead with renewed gusto. Twitter has just raised a further $100m led by Insight Ventures which now values the company at a very super-cool $1bn.

Let me run that by you again - no revenue, the users would be really cheesed off if charges were imposed or advertising allowed and the company is valued at $1bn.

For the limited number of characters allowed, this values the company at $7.14m per character. What's more, this is the second tranche of new money this year and many analysts believe they don't even need it. Makes you wonder why any company would raise so much money without a) using it and b) having a business plan of any nature to try and make a profit.

But in the world of web 3.0, which I am told by many is all about who follows you, it is not important to show a profit. Twitter is all about grabbing users, much like Facebook, another site staunchly not making any money but which had the audacity to use some of its funding to try to buy Twitter for $500m last year.

Here are some interesting 'facts' on Twitter that make it both exciting and potentially worrying for its investors. It's 140 character set Tweet was originally designed to be compatible with SMS as seen on mobiles - such was the lack of a business plan by its founder, Jack Dorsey. It is now ranked as the third most popular social networking site with an estimated 6m visitors to its site every month and around 55m unique visits, and it is ranked by some authorities as the fastest growing site in its category.

However, it is estimated that only 40% of all Twitter users are retained. Of the core of users, who love and use it every single minute, as I have found out on my experience to tell me if their dog is abluting or the river is passing by sluggishly in front of the hotel room window, there is a strong backbone of those who regard this site as the last bastion of free, free enterprise. Many users might just walk away if the site was ever to charge or try to send adverts to them as then the whole ethos of Twitter would be lost and they would have to go somewhere else to send me another article link that they thought was good.

From a business plan and profit making point of view, this is bad news. From an investment viewpoint, I assume it is not about making profit, it is about the 'potential' to make money by selling the company to someone who may believe they have a method of accessing the users for gain. An example of this was Sky's investment of $200m in Facebook. In fairness to Sky, Facebook has a ton of ways to make money in the future and the users will not necessarily mind as they might accept it. But Tweeters are a different breed - they vary from the geeky, sandal wearing types, to a new breed of newshounds and then on to celebrities and lots in between. The danger area that I can see is that relatively savvy users of the web like myself (OK I take your point) can easily get disillusioned with the Twitter bandwagon and leave too easily. The sheer volume of rubbish on I found to be actually depressing rather than uplifting - and it seems that 60% of all people who have a go like me, actually leave. That's not a good percentage of churn for investors, believe me.

There is no doubt that many new sub sets of Tweeters exist which group like-minded or similar business sectors such as StockTwits which links stock traders together. This may be useful if you want to get in on the fast information required to make a few bob on shares. Old bulletin boards hat I have used seem now to be so passe yet at least they contained some background information to make your choice, 140 characters seems like just a hollering shop based on guesswork - but what do I know?

The fact remains, Twitter is a social phenomenon and it is here to stay. Or at least until the investors want payback. Then the fun starts to see how the users react.

Google's Gonna Get You

I am a massive Google fan. I think they have done more to open up the web and unlock the information on it than any other company. It's all very well having browsers and content but finding what you need in the morass is what has made the web exciting, to my mind.

But all this comes at a price - despite the recession, Google clocked up $5.7bn in revenue last quarter and while profits dropped to $382m, they have made as much as $1.29bn of profit in Q3 of 2008. It is, by any measure, an extraordinarily profitable business.

One of its main functions is to aggregate content so that we can all easily digest information, like that from newspapers. While having amazing deals with newspaper firms which nets it enormous advertising revenues, papers are finding it hard. In a recent conference organised by the newspaper industry, Google CEO, Eric Schmidt, was both critical of papers and criticised by them.

On the one hand, news companies saw the incredible revenues Google was making effectively off the back of their content, for which they have to pay handsomely to produce. On the other, Google believes that newspapers should revolutionise and get with the fact that they are useless at distributing their content. Schmidt criticised the newspaper industry for 'pissing off' its consumers and that Google were the heroes for distributing the content more effectively.

The Big Machine

Producing news is an expensive business, much more expensive than aggregating and distributing it. If someone delivered a paper to your doorstep which was just the information you liked as a synopsis of cuttings that would interest you from all papers in just one copy, small enough to digest the headlines but expandable if you want to read the detailed article, then that's what Google does. With it comes all that context sensitive advertising, carefully targeted to get us to click through and earn fortunes for Google.

It is, undoubtedly, a terrific service.

But it is just that. The content is what drives the interest and it's easy to forget that. I write this blog but the wider world beyond a clique of readers never get to see it as Google does not rate it and I do not pay them for anything. The result is that even if I have some practical advice for SMEs, beyond a few dedicated readers, the wider world never knows about it. If I wanted to expand my readership, I would have to pay Google to take interest. That does not stop them hosting the blog or popping adverts on the side. My content still earns them some money.

Google was described by one source from within the newspaper industry as a 'tapeworm', parasitically dependent on the content produced at great expense by the news industry. The consumers, though, want it all ways. I read the Telegraph from time to time because I like to do the crossword but if I want to find out about something quickly I 'Google' the subject and choose a prominent news story - it may not be the best written, the best informed or indeed written by a factual journalist in this country even, but it will be from the company with the highest Google rating which is ultimately driven by money.

The Future

Rupert Murdoch, that bastion of honest content and fighter on behalf of the consumer, has asked if aggregators like Google should in future pay for the content. It's a relevant question from the wily proprietor. There is a long term risk that if news is only ever presented on the web then Google and others will have all the power in terms of distribution whereas in the old days the news companies controlled the chain right down to the vendors in the street. It was easy to see how money could be made from news. Now it's not so clear.

Google always comes back to the 'fair use' argument - if this is what consumers want, why fight it? While newspapers would argue that the intellectual property rights to their content is being constantly eroded by having such ease of availability. The problem really boils down to, if content aggregation becomes the dominant way in which newspapers are distributed and read, then how will newspapers make money on their content? There is a small kickback of advertising revenue to newspapers, but you can rest assured that Google has the lion's share for itself.

Much of what is reported in papers is rehashed and blogged on - some bloggers making some pretty profits on the back of the original content. News opinion like mine, derives its subject matter from content on the web - I make no excuses for that. While I make no money from it, it would be quite an easy thing to do - so for once, I have some sympathy for the man who took away the Ryder Cup and stuck it on Sky.

News has always been big business and while ticker feeds like Twitter claim that it is the new way to spread word faster when terrible events occur, feeds such as Reuters have specialised in this for years. The power is that Twitter could create a new army of 'amateur journalists' across the globe who provide short, sharp news from source rather than rehashing news on line.

Or so we would like to think. It comes as no surprise that Google is rumoured to be targeting Twitter as a takeover. It is a short hop to believe that Google is then going to become not just the content aggregator but also content provider of millions of 'news' feeds.

The News Revolution

The problem for people like me is that in a busy day with other things to do, getting news needs to be in short bursts and I turn to quality sites like the BBC, Sky, Bloomberg and others to get my feeds. I have tried Twitter but it really is like sitting in a large room with thousands of people talking and maybe one person in the room, at just one point in the day says something of real consequence. The rest is just a blur of irritating noise. To get anything from it, you have to use the aggregation devices, many of which are available like Tweetdeck and these can even be fed to your mobile.

You can then 'follow' your Tweeters into the toilet, through the supermarket and down the golf course and see what they are doing, reading and knowing. The problem is that the VAST majority of the 'Tweets' are just nonsense and trivial to the point of pathetic. Like watching Big Brother, unless you are interested in the armpits of yawning contestants lounging on a settee talking garbage, Twitter provides you nonsense.

The world of news still is all about sifting through the mass of data and source bites and putting together something of interest - reporting both facts and content. Reading Michael Parkinson's superb analysis of Jade Goody's life in the Radio Times was brought to me by Google but the content was all Parky. Without his insight, and the thousands of writers who provide news content and make it interesting and informative, Google would be nothing.

We have this dichotomy all the time. My wife's Uncle, Terry Tyler, is a watercress grower and his cress is grown in the clean riverbeds between Sarrat and Chenies in Hertfordshire. He is not a big producer and he cannot afford the fees and chemicals to go 'organic' (perhaps another story of a sham industry awaits) but he uses no fertilisers at all to produce the most peppery and delicious watercress you will ever taste. You will never, ever buy it at any supermarket in the UK or even on market stalls in 'market towns' which advertise fresh, local produce. You will find it used by some of the top restaurants around Britain, however. The reason being is that he cannot afford to sell his product at supermarket prices as he hand grows and picks the lot. Despite knowing this, I still buy most of my watercress in supermarkets as it is more convenient, even though I am know I am buying inferior product and supporting large faceless suppliers who would put Terry Tyler out of business if they could.

We are a consumer society, and we want our product here and now, conveniently and cheaply. I think what will happen to news will be the same as has happened in Terry Tyler's industry - the value of the content will diminish and the value in distribution will grow. We will see a fall in quality but a gain in availability. No longer will stories arrive at us based on the quality of the journalism and the facts but on the who has paid to be at the top of the search.

Don't knock it, we asked for it.