Lichtman Consulting

Twitter: Love it or Hate it?

A friend of mine and I have had a running argument on this blog and on Facebook for a while now, regarding whether Twitter and other microblog sites are actually useful. His words were something along the lines of “high noise to signal ratio”.

I started with all the usual rehashed arguments again, before realizing that he possibly has a strong case that bears investigation.

Bear with me for a second.

I still think Twitter is incredibly useful – what I am realizing is that it has specific utility for specific people.

If you look at websites like Facebook and MySpace, their audience is on the order of magnitude of one hundred million people. Sites like Yahoo might even have a billion regular users. I’m not talking power users – that’s probably only a fraction of the overall total – what I am saying though it that those sites have a broad, overarching purpose to the general public. Give it enough time and everyone on the planet will have a Facebook account.

If you compare this to Twitter – with supposedly 10 million users (yes, I know, it is new and growing fast) – you see one, possibly two orders of magnitude difference in user base.

I have a number of theories why that is, but basically it indicates that the concept of microblogging is taking a very strong hold within a very specific segment of the market.

It also – based on my friend’s reaction – has a long way to go before it gains wide market acceptance.

The utility of a site like LinkedIn is immediately obvious to most people. You post up your resume, and then you do the same kind of networking activity that you might otherwise do at a BNI meeting.

Same goes for Facebook – you probably don’t have enough time to spend with friends, but you still want to see what is going on in their world.

When a newbie first logs into Twitter, chances are that what they see is a neverending stream of disjointed partial conversations, the vast majority of which are utterly incomprehensible to somebody not part of the original conversation. Its like having your head thrust into a gigantic undertow inducing stream of inside jokes and non sequiturs.

So why the disparity between my position that the website is so useful, and his that it is a not particularly funny, running gag-line? Is it just a matter of Twitter having a steep learning curve?

I’m not so sure.

What I suspect is that there is something deeper, and possibly more interesting going on. The usefulness of Twitter is actually highly, specifically targeted at a few core audiences. I don’t have a complete list, but they probably include:

• Marketers – whether offline (ad people, cool hunters etc) or online (SEO types), Twitter is THE place to catch the most current memes in circulation. If you want to know what the world is thinking right now, this is how you find out. I frequently am alerted to breaking news via Twitter seconds, minutes, even hours before anyone else gets it.
• Small business owners – a large chunk of the conversations that I personally engage in with other Twitter users basically amount to an exchange of experience or news or technical information that used to be the domain of card exchanges. Yes, you can get a better feel for the big picture of what somebody is about on LinkedIn. For pure immediacy though, this is the closest you’re going to get to actually pressing the flesh with a bunch of similarly-minded individuals. SMS doesn’t cut it – how would you find people like that in the first place. Its easy on Twitter, particularly if you use some of the other websites in its ecosystem.
• Not-for-profits and social activists – I have more than a little suspicion that heavy Twitter usage played a part in the phenomenon that carried Mr Obama to the White House. The ability for information to quickly disseminate from a broadcaster to a large number of followers – through a process similar to broken telephone – without losing the sense that it is a personal conversation, is unrivalled elsewhere. You can’t get that with television. Yahoo news? Never. A room full of people can only fit a few hundred or maybe thousand people, and you can’t ever talk to all of them. With Twitter, by the time a strong message has been “retweeted” to all ten million users, they’re all actively taking part in that conversation. And those ten million users are influential. For politics or chariities, or anyone trying to change the world, Twitter matters.
• Bored people. Yes, my friend has a point. There are a large number of people tweeting inanities for every person who has something useful and interesting to say. But if it makes them happy, what the heck is wrong with that?

Got some other ideas about what is happening here? Please let me know!

There aren't that many ways to make money online

The topic of how businesses can make money online is one that I have been thinking about pretty much continuously for about ten years now.

Obviously there are large numbers of online businesses that do all kinds of interesting things.

What I’m interested in though is classifying their business models, so that I can understand them better.

There are only a very small number of business models that I have found so far. I could be missing a few.

If so, please let me know!

1. Sell a product or a service – this is the most obvious business model, because it closely resembles the most common way that “brick and mortar” businesses make money. I class websites that sell memberships under this category as well.
2. Sell advertising space – this is how most blogs (like this one!) make money.
3. Act as a middleman – a good example is eBay, which makes money by allowing others to buy and sell from their platform.
4. Beg – this is a common business model in the Open Source community. I’ve never been able to determine whether it works though.

There are lots of combinations of the above, which can blur the issue. I’m still trying to figure out how to classify companies that live off of venture capital without any income, and other companies that live off of government handouts. I think they are probably best classified as #4 in the list above. I can’t think of any other models for making money online though.

An example of one of the above business models can be found in the odd looking box below this line.

IF somebody happened to click on the box, I would possibly wind up a few cents richer than I currently am. Note that I can’t actually ask you to click on it, a) because that would be a violation of Google’s terms of service, and b) because I would then have to reclassify my business model from a combination of #1 and #2 in the above list to #4. And my pride won’t let me.

In any case, if you happen to think of business models that I’m missing, I would love to know.

Microblogs: the world is listening, but who pays for the party?

There are a whole bunch of microblogging websites out there. Twitter is the biggest and best known right now, but I have accounts on about twenty other similar sites, and I’m probably missing a bunch  -  even though I research this sort of thing daily.

I think its pretty obvious that microblogging isn’t going away any time soon. It has too much value for too many people.

The big question is how companies in this space can actually make money. There’s a huge looming issue that isn’t going to go away any time soon, and its pretty simple: I have an account on an “aggregator” website that allows me to post to all twenty of the microblog websites that I use with a single button click. I have a similar system set up for my blog.

So how often do you think I actually login to those websites?

See, the big problem is that the only way a microblog site can make money – as far as I can tell – is by posting up advertising. And the only way they’re going to make money off of advertising is if people actually come to their site.

The vast majority of people who use sites like Twitter do so through software like Tweetdeck, or through aggregator websites like Ping.fm. If Twitter were to just turn off their API that allows other websites and software to post to it, its user base is just going to drift over to other microblog websites that still allow this function.

Charging money to use their API isn’t going to work either, because the software makers also aren’t making a buck yet. They give their stuff away for free too, and they also haven’t figured out how to turn their traffic into currency.

What we have here is a whole ecosystem of really useful websites, supported only by the burn rate of their initial venture capital investments.

My bet on who wins in the long term? Companies like Facebook, who actually have traffic “on” their website, not “through” their website. Maybe they will win by being the only ones left standing, or maybe they’ll win by buying up microblogging websites and keeping them on life support as a service to their users. Either way, my gut says that a bunch of sites that I really enjoy using aren’t going to be around for all that long.

This is #11 on Chris Brogan’s 100 Blog Topics list, and is part of the 100 Topics Challenge.

Several people have expressed annoyance at the lengthy delay since the last post. My apologies. Flu plus a heavy workload do not lend themselves to frequent blogging.

Pieces of the puzzle come together in funny ways...

People my age (tail end of Gen-X) came of age at an interesting junction in history. My parents grew up in a world where the accepted way to get ahead in life was to get a university degree, join a big firm, and then steadily work one’s way up the corporate ladder; retirement being funded by company pension plans, subsidized by government pensions that actually were worth something.

Something funny happened along the way.

Lifelong employment – actually any kind of employment – became passe. Instead, people somehow make their way essentially as free agents, passing time from job to job, hopefully surviving the intermediary periods of unemployment, eking out what living they may – and – with a great deal of luck – scratching together enough savings to (marginally) survive retirement.

After being laid off from a programming job during the last recession, enduring a year of unemployment, building a company with friends (5 years of blood sweat and tears), leaving it, being laid off again in the current recession, building a new company from scratch: I’ve come to the understanding that a) it is more risky for me to be employed by somebody than it is to be an entrepreneur, and b) I really wish that I had known more about business to start off with in the first place.

Pretty much everything I have learned about: running a business, marketing, sales, product development, managing people, collecting outstanding money from customers, balancing the books, finishing projects, handling troublesome clients – I have learned the hard way, by making horrible mistakes.

I sincerely hope that the example I set my (future) children will be different. I want them to learn financial literacy (not through crushing debt the way I learned it). I want them to learn entrepreneurship through example (not by last resort when chronically underemployed). I want them to be able to leverage off of my network of friends and business parters, the angel investors that I know, the worldly mentors I have met and befriended.

My children will do it differently.