What is the Purpose of Twitter?

Twitter: Love it or Hate it?
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!

How to Make Money Online

There aren't that many ways to make money online
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.

Who is going to win the microblogging wars?

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

My Children Will Do it Differently

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
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.

How Not Do To Business

My wife’s laptop suddenly stopped working last night. The theory I’m operating on is that the AC adapter has burned out. I called the manufacturer this morning and they referred me to a local company that they use for servicing.

The following is an (unfortunately all too typical) example of lousy customer service. I’m not sure how this “service” company stays in business.

I tried calling them this morning. Got their voicemail. Wandered from box to box for 15 minutes before getting somebody who had no interest in talking to me. I had to ask him whether I should come by. They wouldn’t commit. I decided to try anyway.

I drive to their shop, and there is nobody at the counter. Some guy with long hair walks out of the washroom, looks at me like I’m a martian, and then walks away back into the warehouse without saying anything.

There’s a bell on the counter with a note that says “please ring for service”.

I bang on the bell a few times, and eventually a manager comes out of their office.

Me: I have a laptop that needs servicing. Toshiba told me to come here.

Manager: “Sorry the technician is out”.

Me: Well what am I supposed to do?

Manager: “I don’t know.”

Me: Should I come back later?

Manager: “I don’t know.”

Me: Well I’d like to get my laptop looked at…

Manager:  “I don’t know, why don’t you leave the laptop here?”.

Uh…so that you can lose it?

Me (stalling): “Well its probably the AC adapter”

Manager: “We would have to order that in, we don’t stock those”

Me: “Well somebody should probably look at it first, just in case it is something else”

Manager: “Well you could come by later and see if the technician is in”

Me: “You don’t know if they will be in?”

Manager: “No”

(Note: it is about two hours before they close, and I reside half an hour away from them)

I leave. Try calling again later. Finally get through the voicemail to the tech support extension. Nobody picks up, and the voicemail is full. I dial zero. Finally get somebody (they don’t identify themselves).

Me: “I’m trying to get through to the tech support people and nobody is picking up, and their voicemail is full…”

Somebody: “Oh. Well they’re there. I’ll go and make sure that they pick up. Hang on.”

On hold. Five minutes pass.

Somebody (I assume a technician) picks up. Their English is heavily accented. I don’t hold that against them. They don’t sound like they want to be talking to anyone. I do hold that against them.

Me: “I was here earlier today and the technician was out. I need to get a laptop looked at.”

Technician: “Oh.”

Me: “Well how should I go about this?”

Technician: “I don’t know”

Me: “Do I bring it in tomorrow?”

Technician: “I don’t know”

Me: “Well will somebody be in?”

Technician: “I don’t know”

Me: “So how do I get the laptop serviced?”

Technician: “I don’t know. Maybe bring it in?”

Me: “Is there a standard way that you work? How do I go about getting a laptop serviced?”

Technician: “I don’t know. Bye.”

They hang up.

I’m not sure whether these people actually want the business of servicing the laptop or not. I’m not sure whether they even service laptops. I don’t know how to go about getting their service or their attention. I don’t know how to get in touch with anyone there. I don’t know what their standard procedure is. I truly don’t know how they stay in business.

Somebody Has to Say It

This is #10 on Chris Brogan’s 100 Blog Topics list, and is part of the 100 Topics Challenge.

I’m not somebody who particularly courts controversy. Personally, I think that saying things just to get a rise out of people is a waste of precious time. I suspect I’m going to irritate a few people in the next couple of paragraphs though, and I sincerely apologize in advance.

I just read a quote from Yahoo! news that a certain analyst thinks Google’s stock price is going to hit $500 in 2009. The basis for this estimate is that he thinks Google will ultimately be successful with its push into the mobile phone market. Now I’m not somebody who discounts Google – I think they’re a great company. If you crunch the numbers though, I don’t think that a share price of $500 makes any sense.

Let’s look at a couple of scenarios:

1. The numbers for 2008

In 2008, Google’s net earnings (i.e. after expenses, but before taxes – what is commonly referred to as EBITDA) were around $5 billion US. This is an estimated number as they haven’t yet released the final numbers for the fourth quarter of 2008. If that holds, then based on their current share price of $325, and 3.15 million outstanding shares, their earnings per share (EPS) is a pinch under $16, and their P/E is around 20.

2. Assume their P/E stays steady and their earnings grows in 2009

Assuming that their P/E continues to hover in the low 20s, in order for their share price to hit $500, their earnings would have to increase to around $7.7 billion USD, an increase of about $2.7 billion – or 54%. That’s a pretty substantial increase in the current economy, even for Google. Their earnings “only” went up 37% from 2006 to 2007. We’ll break these numbers down further in a sec.

3. Assume their income stays steady, and their P/E increases

Assume that Google’s net income holds around where it currently is, their P/E would have to be around 31 in order for their share price to hit $500. That’s pretty high for a tech stock these days. Apple’s P/E is currently around 17 for a comparison.

Don’t Call Me – I’ll Call You!

So let’s say that Scott Kessler is correct, and Google will bring in an additional $2 – 3 billion in revenue in 2009 based primarily on their mobile venture.

Bear in mind that Apple’s iPhone, which accounts for 39% of their 2008 revenue at $4.6 billion is likely to see some slide in sales based on the general economy.

Bear in mind that Apple is going to fight like crazy to hold onto market share – and we’re not even looking at the big boys like Nokia.

Bear in mind that Google’s Android platform is free open source software (FOSS), meaning that they’re giving it away.

The people at Google aren’t stupid, and they’ve put together a consortium of companies that are going to make Android-based phone handsets. I assume that they’ll figure out some revenue streams from that – driving more mobile traffic to their search engine (and hence their ads), or even selling hardware themselves in a pinch.

Given that Google is tightening the belt and laying off temp workers, I don’t think anyone in Mountain View is relying on selling 10 to 15 million handsets in 2009. ($2 billion divided by $200)

My prognostication (not that I’m any good at that!): look for a 10% increase in revenue for Google in 2009, based primarily on eating their competitor’s lunch in online advertising. Share price should go up accordingly.


How I Find Blogging Ideas

This is #9 on Chris Brogan’s 100 Blog Topics list, and is part of the 100 Topics Challenge.

Over the years I’ve had more than my share of writer’s block. I’ve found that I tend to go through short periods of intense activity, where I write a vast amount – articles, blogs, lyrics etc – followed by years of “drought”.

One strategy that I have adopted is to work with lists wherever possible. I use them to generate ideas for material (you need only look at the top of this blog entry to see an example), as well as to help structure longer pieces (there’s nothing like a well structured list of chapters for helping in the process of writing a book).

For blogging purposes, keeping a close eye on the news is also useful. There’s nothing like writing about something currently interesting to people when it comes to attracting attention to a blog. However, my gut feeling is that writing only about topical subjects means that the material will rapidly become dated. If you use this approach, make sure that you also write about enduring topics.

As somebody who writes largely about business-related topics, I draw much of my material from my day to day experience running businesses. A good way to find topics to write about is to draw on your own life. If you use this approach, a good strategy is to learn to allow your own “voice” to come through in your writing. Your unique voice and personality is powerful. Write about the things you feel strongly about: things that you love or hate, things that amuse or horrify you.

A final way to find topics: ask people what they want to read about.

Another Corporate Fraud Announcement

Yahoo! News reports that Satyam Computer Service’s Chairman has resigned after admitting to falsifying results.

It always fascinates me how some companies can get away for years with this kind of thing, then fold like a deck of cards when the economy takes a downturn.

Somebody wise once told me (they were talking about small business partnerships) that things always tend go smoothly when everyone is making money. I guess a recession just does a better job of highlighting underlying flaws in an organization that were always there.

Ways to Save a Bad Time at a Conference

This is #8 on Chris Brogan’s 100 Blog Topics list, and is part of the 100 Topics Challenge.

A few years ago, my business partners at the time and I went to a local conference. I’m not sure what it was about this conference, but it didn’t seem like we were getting any opportunities to network with people. Sometimes it’s just one of those days. You either already know people you talk to, or people aren’t friendly (I don’t know why unfriendly people go to networking events), or maybe they just didn’t set things up right for people to meet.

Faced with the choice of sticking it out or packing it in, we decided to take an alternative approach.

My one partner happened to have a bunch of gear in his car, including a wireless internet box (one of the high speed cellular ones) and a wifi access point. So we whipped together a free hotspot, and wrote out a sign with a marker to let people know they could connect to the internet from us. Pretty soon we had a small crowd around the table we were occupying, and we got to chat with people after all.

Moral of the story: if the conference sucks, its up to you to make it better.

How Best to Comment on a Corporate Blog

This is #7 on Chris Brogan’s 100 Blog Topics list, and is part of the 100 Topics Challenge.

This topic hit close to home, in a certain sense, for me. As you probably noticed, the home page for my company is a blog. I did this for a number of reasons, one of them being that I am very interested in what my customers (and potential customers) have to say.

When commenting on a corporate blog, the objective is usually to either voice a complaint, or to compliment the company for the things they are doing right.

In either case, you’ll get the most traction if you do the following:

  • Make it specific: give detailed examples
  • Make it actionable: if you’re going to criticize, make sure that you also come up with some ideas about how to do things better. If you don’t, you aren’t going to get anywhere. If you are complimenting, write down some ideas for other companies to do things right in the same way.
  • Carrot vs Stick: if you need to be negative, don’t be entirely negative. One of the best ways to get great customer service is to be nice. It also helps if you have lots of neat ideas that can help the culprit do things better in future.