04:54 AM

Analysis: Twitter Takes Its Money Off Of The Table...And The Commoditization Of Apps

Twitter used to be a "joke" in that it didn't have a business model. Well, it has one now. It said that it will start to promote ads in Twitter streams.

Twitter Has a Business Model: 'Promoted Tweets' - Advertising Age - Special Report: Digital Conference 2010

A single ad will appear at the top of a search. That ad is itself a tweet, and users can "re-tweet" the ad to pass it around, make the ad a favorite or reply to it.

Tweets as ads
Not surprisingly, Twitter's first advertisers, Starbucks, Bravo and Virgin America, are also heavily into Twitter as a communications medium.

The Geekorati aren't sure about it. Robert Scoble made the point that "I put a lot of value into Twitter but I don't get paid by Twitter. I doubt I'll see anything from these new ads."

And he's right. Twitter is nothing without content. And as users that's what we like about Twitter -- its content.

For a power user and a keen promoter of Twitter, Robert Scoble hasn't been paid by Twitter yet he has done a heck of a lot to promote Twitter. Without people like Robert Scoble and his 33,154 Tweets, Twitter wouldn't have the traffic to attract advertisers.

Should he share in Twitter's revenues? Should other Twitter content creators share in Twitter's revenues?

Filthy lucre...

'Monetization" has a dirty connotation in SocialMediastan, and you can see that in the criticism Twitter is receiving over its ads programs and its move into Twitter apps.

This issue of appropriate business models has been with us since year dot on the Internet. I remember the very early days of the Internet when users were aghast at the prospect of advertising. At the time, many Internet users said that ads would ruin the Internet and that people wouldn't put up with it. It was a very big deal when Yahoo first started showing ads.

We know how that turned out. The Internet didn't collapse because of ads. And now it seems drenched in ads, advertorials, spam, scam commercial ventures, malware, Demand Media-like content-lite content, and more... More in this context is definitely less -- the Internet is becoming a less compelling experience.

Yet we still turn up every day, logging in, for hours at a time... How much crap can we take before we switch off? I guess we'll find out soon enough.

But, let me get back to the subject of my post.

Twitter and the commoditization of apps...

Even though my colleagues would chuckle about Twitter's lack of a business model I always thought that the heckles were misplaced because Twitter had plenty of time and plenty of opportunities to create a viable business model. And that's what is happening now.

Twitter is vacuuming up all that money it left on the table and that Twitter apps companies tried to fill in. Twitter's recent acquisitions have shocked Twitter app developers and now there is a movement among them to try and create an open-source Twitter platform.

Yet Twitter's willingness to compete with its apps developers shouldn't have been surprising. After all, it has investors and it has a fiduciary duty to maximize profits.

But there are consequences to its actions. It will result in all apps developers becoming very suspicious of all other platforms and their owners. This will chill the rate of all apps development.

And that's a potentially good thing for Twitter because any rival platforms will not have the same mass of developers helping those platforms drive usage.

Apps and media...

There is also another trend -- the commoditization of apps. The hundreds of thousands of apps developed for iPhone, Android, Facebook, Twitter, iPad, etc, has created a perception that apps are plentiful and thus have less value.

Yet apps development has become more complex because there are a multitude of platforms and thus development costs are rising.

The issues facing apps developers are very similar to those in the media industry -- content is expensive to produce but it's consumed for free. Apps are expensive to produce but are consumed for free (mostly).

And as in the media industry, the media aggregators seem to be ones that make the money, which in this case are the App Stores, which take a cut, or the platform owners, which use the traffic generated by the apps to sell ads. The app developers, like the media creators, earn crumbs while the aggregators make the millions.

What's the solution?

I think that just like in the media industry, media becomes the loss leader, you have to have something else to sell.

In the apps world, apps become the loss leader, you have to have something else that your app is helping to sell.

For example, I'm now offering media consulting services to support my journalism. SVW is a loss leader for my consulting services - 415 336 7547.

(Please see EC=MC - Every Company is a Media Company.)

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