Social media for the Paranoid

Its not a fight between two young hip Web 2.0 companies (Twitter and Facebook), it is a generational conflict between Twitter and the Cellular Operators. Just as the cable companies became pipes for content and Google got all the cream, so Twitter has the chance to do the same to the Cellular Operators because Tweets are really Text Messages version 2.0.

So according to Portio Research there were 750 billion SMS (Short Message Service) or “Texts” in North America in 2009. Worldwide SMS brought in an average of $36.70 per user, or $150 billion to the cellular operators.  (That’s about twenty-five percent of their revenue). That is alot of money.

Now the Cellular Operators are placing alot of hope in MMS – essentially Texts with attached photos. Last year there were 17 billion MMS in North America (less than 20% of the volume of SMS).

Last year Twitter had no revenue, and 55 million Tweets a day. That is less that 0.01% of the North American traffic. But it is growing at a exponential rate while SMS traffic is growing linearly.

So why should the Cellular Companies be terrified?

Simply because there has been more innovation in the mobile short messaging world in the last year than in the last ten. Twitter is building a near real-time (200 mS delay) messaging system that can scale to global proportions and they have enough money to build and run it thanks to their sky high valuation.

They have an open API which means anyone can build applications that use their data, and though they are now building their own mobile clients they do allow other vendors to build mobile clients. They are also building a globally unique namespace (essentially the equivalent to your phone number). They are going to run out of namespace sooner than they expect – so grab a Twitter handle as soon as you can!

They have also tackled the issue of only 140 characters by allowing metadata to be carried in a 2 Kbyte package attached to each Tweet (message). That is alot of space, especially if it consists of information such as location, price, key words, and urgency. If it gives the location of associated files such a pictures, videos, spreadsheets, or documents then the size is unlimited.

This makes it possible to use Tweets as essentially “the writing on the tin” eg a description of what is attached – similar to the title of this posting or the heading on an email.

Cellular Operators could do the same – but they would charge per Tweet and that is hard now that the idea that these are free is established. Ironically people are OK with the idea that Texts (SMS) are charged (either by the message or by the month as an add-on fee). They do make money from the data package that users purchase with the cellular plan – and in theory they could block Twitter in the same way that they are blocking Skype (to protect their voice revenue) – but they need to do that out of the gate (eg today) if they have any chance to make that work. At the moment they are using Twitter and Facebook to promote their data-plans and phones, so that seems unlikely.

So they are left with chasing the revenue from users without Data Plans (the vast majority today). They could use the MMS infrastructure to build a rival to Twitter and open it up to developers. They could build their own search engine for social media. They could even integrate their billing system into Tweets so that users could pay for stuff and send money. They could also launch a rival network that would support the builders of Twitter based applications that are feeling rather bruised from Twitter’s entry into “their” space.

Will they do any of this? No. Telcos are run by a generation that is having a hard time understanding social media. Ironically this is the same generation that embraced cell phones while their parents were completely mystified as to why you would want to be accessible all the time.

Today Twitter traffic is so small that it is probably less than the Text traffic in Maine on a slow day – so Cellular Operators will not wake up for a few years, and by then the Twitter ecosystem will be very hard to compete with.

That’s a pity because what we really need is an alternative to Twitter – after all what happens if their system crashes? Facebook will not cut it – they are in reality an application (by which I mean that they provide an interface to the end user in the shape of a webpage)  not a network provider – they are focused in a rich end user experience, not super fast message transmission.

Blow torch and crème brûlée

Wednesday night at the Twitter Chirp conference was a time for much gnashing of teeth as the assembled flock swooped around the San Francisco docks and crapped all over Twitter’s catering: There was no beef. No chicken either for that matter. No even a prawn cocktail. Believe me – I asked a caterer and she looked at me as if I was asking where the fresh blood was on tap (we were a long way from a full moon so she had nothing to be worried about).  It was Vegan, and that was how their new revenue model appeared.

By the following lunchtime when the catering was provided a cluster of lunch vans – featuring food like crème brûlée and spicy beef burger – and the ensuring competition provided what people really wanted, the impact of the revenue model became clearer.

I believe that Twitter’s revenue model will work – and will have the opposite effect from what is feared by their entry into the application space – namely that their share of the display of Tweets will drop from 25% to around 5% as their user base increases by a factor of five. However the good news for them is that they will keep the beef while some of their partners will get the bread, and the others will have a blow torch applied to their crème.

So the basic idea is that of ‘promoted Tweets’ – Tweets that you have to pay for. To understand this you really have to understand that Twitter is a near real-time high velocity broadcast medium. What on earth does that mean? Essentially a small number of topics dominate the Twitter conversations at any one time. As I write one major topic is the grounding of European flights because of the Volcanic dust in the jet stream. Many people monitor all the posts related to a topic such at this by using ‘hash tags” essentially special search words that people add to their Tweets. So for a big event like this there are thousands of Tweets a minute, and anyone post disappears off the screen very quickly. So if you want to tell the world that you will be running a special bus from London LHR to Paris CDG airports for stranded passengers it is very unlikely that many people will see the message. Hopefully some people will see it and “re-Tweet” it to their “followers” (essentially people who elect to follow what they write) and so the message gets out. Promoted Tweets stay at the top of the list of message for longer. How long is not clear but lets not go there for now. Lets just assume that it works and people click on the promoted Tweet and get on the bus.

The bus company is going to pay Twitter for this – what this is (user impressions, clicks, etc.) is not clear and that really does not matter for now.

What matters is that Twitter will pay the company that displays the Promoted Tweets to the end user roughly 45% of what they get (after their direct costs are deducted and the remainder split 50:50). I’m going to call them “Display Companies”.

So at first pass this looks like Google’s syndicated network where Google Ads appear on user’s pages and the users get paid for displaying them. But there are several crucial differences – the first is that Twitter is providing both the Ad and the Content to the Display Company. The second is that Twitter displays a minority of Tweets (25%) and their Display Company partners (everyone from Google to a one man development shop display the rest).

So for the Display Company they don’t need to generate their own content, instead they need to add value to the content being provided by Twitter. I am now going to argue that for pretty much every good use of Tweets it will be better for Twitter to let a third party handle the Display.

Editorial Control

Twitter is essentially like a cellular company that transports text messages (SMS) – they are covered by the Common Carrier laws (or similar laws in other countries) which basically mean they can not be sued to the basis of the message that they are transporting. The same is not true for the Display Company if they do too much processing on the messages. How much is not yet clear, but clearly the more you mess with the flow the more value you add and the less like a Common Carrier you are.

Twitter either does not see this distinction, or they think that there is enough business in simply displaying the Tweets without exercising any editorial control. If it is the former then they will learn fast, and if it is the later then there is a huge opportunity for other companies to act as “front men” – clearly not big visible front men, but thousands of small operators in difficult legal regimes (think Venezuela).

Mashup

Then in the space of unmoderated display the biggest value of Tweets would seem to be in concert with other information. So returning to the example of the Volcanic dust in Europe there is alot of value in a “mashup” that combines a map of the affected area overladed with the intensity of relevant Tweets and a travel information service, such as Kayak.com.

Mobile

At the moment Twitter is making a major push to have their application running on every mobile platform.The stated goal is the make Twitter more accessible – and reduce the hassle of selecting and installing a third party application. Facebook does this, so it seems reasonable for Twitter to do the same. It seems to me that this is an intermediate state of affairs and pretty quickly this functionality is going to be built into the base operating system of the mobile phones – just like the case for Texts (SMS). There are advantages all around – Twitter gets massive penetration and a barrier against competition, users get an instant use experience, the cellular network operators get a slice of the Twitter advertising revenue, and the phone OS providers get another feature in their feature wars.

Search

At the moment 25% of Twitter users go to the Twitter website to search for Tweets. Going to Google or Bing allows them to search Tweets and other content, so it seems hard to believe that they will continue to conduct search on different webpages. For complex Tweet search, such as multiple simultaneous, real-time search they will continue to use Twitter clients such as Tweetdeck.

Conclusion

Twitter has to choose between control and growth. If it is to reach its stated goal of 500 million users (time-frame not stated) then they can’t control the Display of Tweets, and they will need to stick to the meat of the problem  (transport and search) – while their partners focus on the bread and butter business of display. Incidently this conclusion is also true (for different reasons that I will explore another time) for the creation of Tweets.

So give it a year or two and Cisco will buy Twitter – after all they bought Webex.

Door to Door Service

The FT is reporting that the amount of cellular phone data traffic has surpassed the amount of voice traffic.

We’ll that’s nothing. I’ve been to the planet Bolt where cell phone calls almost don’t exist and data is everywhere. During my four hours on planet Bolt I saw the future – and its like a hyper accelerated version of eight minute dating. If you want a conversation on planet Bolt, youd better be able to pitch in 8 seconds, and that has big implications for how a business – or even a parent communicates with a younger generation.

So first, let me explain that earlier last week I organized a drinks party for alumni of my business school (Insead) in Orleans, a local bar and restaurant. Due to a splendid piece of good (or bad) timing, I managed to pick the same time and place as a 1^st birthday party, and an eight minute speed dating session. The ensuing chaos caused several of the single guys to take one look at the babies and make a run for the hills, and me to win the “piss up in a brewery” failure award.

So what did I learn from watching two hours of speed dating from the comfortable world of a drinks party? Well, that it was a huge amount of work and stress for all involved – especially as it seemed to be done without the benefit of that great social lubricant – alcohol.

Anyway, back to planet Bolt, which on planet Earth is know as the Bolt Bus. This is really a Greyhound bus in wolf’s clothes – with brand new black leather seats, power outlets at every seat, and free wi-fi. All for $15, including a free trip from Boston to New York. Makes a change from the Fung Wah bus which pioneered the concept of cheap bus rides from Boston to New York – along with the concept of unscheduled picnics in the breakdown lane of the Turnpike, while Mr Fung Wah would poke around in the engine compartment as clouds of black smoke billowed out.

The Bolt Bus was full of twenty–something year old cool dudes – and me. The entire bus of fifty or so people made a total of two phone calls – one in Yiddish to a guy’s mother (who else?), the other to announce the bus’s arrival. Two people (including me) read a newspaper, and one person had a book. So what did they all do? Well very little talking for a start. Instead everyone was online – with iPhones, Droids, or laptops. Everyone had a dozen conversations on the go – all the time. One Berklee College of Music student was arranging a piece of music on his laptop by asking his friends to send him snippets of music that he would mix together – all via Facebook. Another was writing a term paper with the help of her Facebook friends.  The pace was crazy. People were texting on their cell phone at the same time as tapping away on their laptop. Just looking at the speed with which they switched conversations made me dizzy. Eight minutes would have been an eternity in that world – more like 8 seconds. So what did they do when they ran out of steam? Slept. We could have been on the moon – nobody looked out the window, and long attention tasks like reading a book were rarer than black leather on a vegan bus.

I got off in New York exhausted from watching all this – and headed into a bar. The beer was great, pity it cost more than the bus, especially as I was late and had to bolt it down.

Ever looked at the ads on Facebook?

Well sort of – after all they do occupy the right hand column on the webpage.

So why are the ads that I see so much worse than the ads on Google?

All I get are ads for herbal medicines that make my skin look younger  – don’t they know that I’m a Brit and so I drink gallons of black herbs with milk?

I think the key issue is that on Facebook advertisers only have indirect clues as to what you want to do. Given Facebook’s origin as a dating site a lot of these clues are about relationship status.

So ideally  when your relationship status changes from “married” to “single” they can show you a dating service – alas that is not an option with the current advertising selection method – so you just have to look for single people.

Puritanically, according to the Facebook advertising rules, they can not show you the same ad if your relationship changes the other way.

Then it turns out that according to the same rules you have to show your ad to either  men or women – not both – so you are out of luck if you swing both ways.

This all adds up to Facebook being a lot closer to a magazine ad than a Google advertisement. With a Google you know what the user is looking for, and you can respond at that moment. Very different form of advertising. I don’t belong to the demographic that reads Cosmo magazine – even though the articles look great, especially the “best swimwear”, so I don’t get to see those Ads.

So when I read that Facebook is overtaking Google search in terms of ‘face time” eg time reading the page, writing a message, or searching for friends, I really don’t care because what is relevant to advertisers is “engagement time” eg search time looking for something. Now if I could see that the user was searching for single friends then I might want to display an ad for a dating site.

Equally if I could monitor the IM messages to and from that user and look for keywords I would also be better able to judge what that user wanted at that time. That, of course, is what Google does on gmail.

Alas, most of the advertisements I have seen on gmail have been for sump pumps – and indeed I bought two only this morning. Of course I could have run a sump pump campaign on Facebook aimed at guys in New England – but alas few of us have joined the “flooded basement appreciation society”, so we are hard to identify.

Now what Facebook seems to be doing is driving up the amount of information that users share publicly to drive up the number of page views and time on the site. I would suggest that they improve their advertisement filters. A simple filter that says “advertise if the status of this user characteristic has changed in the last 24 hours” would be great. Least for targeting people changing sex.

Fortunately I am really only interested in changing my age – downwards, so I’ll keep drinking the Facebook Koolaid – least the herbal variety that they advertise so often.

Social Media and Electronic trading platforms are both Cloud Services - superficially they seem to share nothing in common, but on closer inspection there is alot that they could learn from each other. This article takes a first pass at looking at the implications of this comparison.

Cloud Services are all the rage – everything is apparently moving into the Cloud – or more precisely into a datacenter not owned by you. The term “managed service” seems so old fashioned and quaint today.

It seems to me that Cloud Services really divide into two; commodity and monopoly.

Commodity Cloud Services are all about the basics of storage and processing – online backup, email, web hosting, user authentication, and conferencing. Essentially all the valuable data belongs to the customer, and the vendor relies upon price and reliability to sell. The competition is essentially in-house - but once a company wants to outsource there are alot of options from some really big players (Microsoft, Google, IBM, Amazon).

Monopoly Cloud Services have something that the user can’t get elsewhere. That used to be specially collected data (Lexis -Nexus) but more and more it is moving towards user generated data. So when you enter your data into a Social Network Site it ceases to be your data and instead belongs to the Social Network. This is why Union Square Ventures (early stage Twitter investors) invested in Twitter – it is pretty hard to argue with their logic or their foresight. It is also not surprising that they don’t believe in software patents, which were the traditional way a software company enforced a monopoly (well until the time it took to get a patent became three years plus, and hence only useful to the people who focused on patents and not building a business, but I digress).

So once you conclude that the user data is exceedingly valuable you need to make more of it. You really only have two levers – more users and more open user data. Hence the push by Google and Facebook to relax privacy settings.

Electronic trading platforms face the same issues – their value depends on the liquidity of the market (how many players and how much trading volume), cost of a transaction, lower spreads (the delta between buying and selling an asset), and greater transparency. So they focused on getting lots of real users on their network Then they discovered High Frequency Traders and their world changed – now these firms are responsible for about two-thirds of all US equities volume, and life without them is pretty much impossible for any exchange.

So why do Social Networks care? Well they are about to go down the same path.

The first big step was taken by MySpace with its joint venture with three (Warner, Sony BMG, and Universal) of the biggest record companies. OK – they did not want to do this deal, but they did not have alot of choice given that they were being sued by Universal over copyright infringement.

So today the front page of MySpace has Britney Spears – while the frontpage of Facebook is pitching running the Facebook application on your mobile phone. In other words Facebook is focused on driving up user generated content, while MySpace has switched to professionally generated content. Brittney Spears is the High Frequency Trader of the Social Networks space.

Now the Financial Times has an article on a Japanese competitor called Ameba Now, who has reached 1 million visitors after three months of growth. They allow usernames in Japanese characters – but the more probable reason for their growth (according to the FT) is that they have persuaded celebrities to use their service.

Does Facebook need Lady Gaga? Yes – long term they will have no choice because while the user’s own data is valuable it is also replicable.

On the plus side, according to Nielson, in January the time visitors spend on the Ameba site is seven minutes as opposed to twenty-five on Twitter – but the addiction to High Frequency Celebraties seems to be unavoidable.

The NY Times is reporting a YouTube video suggesting that the FDIC sale of IndyMac to a group of investors was a sweetheart deal. No surprise, particularly the day after Valentines Day.

What is interesting is to analyze their reaction, and place it within the constraints that as an august Government body they are bound to follow. Then I am going to suggest what they should do in the short and long term.

So on one side of this public bun fight is a gentlemen called Leo Schruppruns a combined mortgage broker and bank called FirstPriority Financial that works in  a series of states including California (home of both FirstPriority Financial and IndyMac). He has created an organization called ThinkBigWorkSmall (TBWS)that is focused on using Web 2.0 tools (ie Social Media) to build marketing databases for mortgage professionals. they sell access to their approach for $49.95/month. Part of their strategy is to build a Social Media based campaign against mortgage related issues. This information can be found from the website, but it takes quite a bit of work.

One of those is against HVCC, which stands for Home Valuation Code of Conduct, which basically state that Freddie Mac will not purchase mortgages from Sellers of mortgages that do not adopt the code with respect to single-family mortgages that are delivered to Freddie Mac. This matters alot to some mortgage originators who claim that the code is resulting in faulty appraisals. One would guess that “faulty” means too low.

So there is a small outfit with limited funds but a clear agenda that will clearly benefit them financially it succeeds, and will also benefit them because it builds their brand as they run the campaign. Great strategy, and so far, great execution.

On the other side there is FDIC, Federal Deposit Insurance Company, which is an independent agency of the US Government, that insures certain bank or saving deposits. It is funded by a tax on banks, and has the power to take over failing banks – which is what it did to IndyMac. Their goal is primarily to be invisible beyond that little FDIC insured sign you see at your bank. As they are funded by banks and not the tax payer (who ultimately guarantees FDIC and so is on the hook for their losses) they really don’t want alot of public attention. So when they get some unwanted attention they have very little experience or material to fall back on.

FDIC is also bound by all the restrictions placed on a Government agency such as the First Amendment of the US Constitution, Public Records Law, and the Open Meeting Laws (also known as “sunshine laws”). I’ll discuss all of these in a separate blog, but for now the core issue with these laws is that it is very unclear how they relate to social media, and so that naturally makes Government bodies cautious.  Private individual and companies really have none of these worries, so their lives are much simpler.

So there you have the scene set – David versus Goliath, though it is not clear that it is a clean fight because Goliath has so many constraints that it is hard to push back, and that is exactly what you see so far – a very weak response for the FDIC where they seem to have had the first video taken down by YouTube, but almost immediately replaced by a new one with a response to their critique. A press release, which was relayed in a twitter feed, and some main stream press.

So what should they do, in the short and longer term?

Short Term

In the short term they gain very little by getting YouTube to pull down the video, you can actually argue that they lost alot by pulling it down because it is easier to attach a video with alot of errors than one that has been modified to blunt the criticism – which is what TBWS did when their first video was removed (for unknown reasons). US Government agencies also have to be careful of getting a video or a posting removed because of free speech issues.

Instead they first need to defend by responding directly on the YouTube page quickly enough that they are “above the fold”, which in an online context means that the response can be seen at the same time as the video. All the response needs to say is that this video is misleading, and then point to a webpage. Initially all the webpage has to say is “We are FDIC and this video has errors and omissions”. While this is not very informative it has the huge benefit of getting a word in at the very beginning of the discussion which is bound to follow if the story is at all newsworthy. Then the FDIC can work on expanding out the webpage with the key responses, knowing that the link to the page is in prime position on the offending page.

Next they need to attack with the very short (less than 140 character – so as to fit on Twitter) key messages over all of the key social media channels (Twitter, Facebook, Google Buzz, YouTube, etc.) This means alot of postings in alot of different places, which means when the search engines pick on the story they will show the key messages directly, then only later would the user get to the offending video. That way they already have the criticisms in their mind when they start to watch (if they do).

Then the FDIC needs to open up a second front of attack, by using those same conversations to remind readers of the context. In this case – FDIC saves the day, or a video of a frustrated IndyMac customer. At the same time a very small amount of research about the organization launching the attack is very helpful in framing the response because it shows the underlying motivations and hence which messages will work best in response.

Finally as the newsmedia responds with stories and analysis then these can be used as re-enforcements t to the balanced version of the story.

Long Term

By the long term I mean what can be done when not fire-fighting.

The most important long term goal is to occupy your territory.  What I mean by this is to ensure that you own and use all of the major social media channels under an identity that is clearly identified with your organization, and ideally validated or verified. Here is Twitter’s verification process – they only do this with selective accounts because of the “cost and time required”, so plan ahead!

Next is to stock-up. This means having canned responses pre-approved. All the standard stuff about who you are and what you do. Equally a list of all the good press coverage – so that you have things to send out before you have anything to say.

Finally – gather allies. Social media is all about friends. You need them when things get tough, so look after them when things are good and keep them up to date. Then when you need their help – ask them with a clear call to action – please reply to these postings, here are some facts that we think are important.

Conclusion

The most important thing to realize is this is all about emotion not fact. You probably have all the facts laid out and the conclusion is clear, but you feel like you are loosing. You have no choice as a reputable organization but to ensure the facts are correct, but you can’t stop there. You have to bring in emotion. You have to show people who think they are about to loose everything in  bank crash being saved by your organization. They are your defenders.