Wednesday, 11 July 2012

Twitter's row with LinkedIn is about Ad money. And an IPO. Tweeters might not be happy.

There's a lot going on it seems at Twitter, launched by Jack Dorsey below in his first Tweet above, July 2006. You'll note it was called 'Twttr' then a reference at the time to 'Flickr' (2004).

This is a story of a good Social network that is a real success but that now wants to make big money following on from the Facebook IPO. In doing that, they could lose their very essence. Is there an issue with making money? Yes, if it screws up the whole plan.

Recently ending its syndication deal with LinkedIn, meant that tweets no longer show up on LinkedIn pages - and LinkedIn is the poorer for it as its pages start to look sparse. It's the start of Twitter ending their relationships with third parties. Money is at the core of this because Twitters revenue has not been exactly spectacular as we're discovering.

Twitter (over 500 million users today) makes much of its revenue from Ads (according to Forbes, about 260 million usd last year) although is thought to have made a loss in 2010. A loss two years ago.

And from The Wall Street Journal Twitters revenue was even less than the Forbes estimate "Now Twitter is striving to mature its business to be fit for an IPO and finding it has a long way to go. Twitter's ad revenue reached $139.5 million last year, eMarketer Inc. estimates, while ad revenue at Facebook which is two years older than Twitter—was 22 times larger at $3.15 billion."

Not good either way. Shockingly bad actually.

Revenue is as always, based on advertising to eyeballs. So when third parties like LinkedIn, channel tweets onto their own platform, Twitter loses those eyeballs and the Ad dollars that go with it.

So what Twitter is trying to do is to bring those eyeballs back to their own site and therefore, "monetise" them by making more money through Ads. Forcing people to view the ads on Twitter alone. In doing that and creating higher revenues, it's getting ready for an IPO.

Interestingly too, about 80% of its traffic is via mobile, highly lucrative.

Rumours abound that Twitter is to do the same and cut-off Facebook shortly and a general "clamp down" on third party apps. GetGlue could be one in the firing line I'd guess.

From a Twitter point of view, it makes money sense and a precursor I'm sure, to an impending IPO with a value estimated at just under 9 billion usd. It has already raised more than 1 billion usd in venture funding so whilst that's fine, they'll want to see their money back sometime soon. An IPO is one way to do it. Money, money, money.

Rumours also abound that Twitter is about to acquire Sense networks next month, a mobile analytics company, that provides their data for, you've guessed it, advertising. They use mobile location data and behavioural data to fine-tune ad targeting. So local advertising is on offer here by geo location. It would be Twitter's sixth acquisition this year but interestingly in the Ad space.

Roll in the audience, give them more ads, and make more money for yourself. But from a customer experience it may not be so good. After all, customers want their tweets integrated to Linkedin/Facebook and others. It's much easier and spreads the word faster.

Recent changes on Twitter include website redesign, photo sharing in 2011, privacy updates (always comes with a warning because mostly it allows them to share more of your data), logo updates on June 5 which all sounded very "corporate" and in particular, improvements on their Search, long overdue.

So Twitter is turning into its own social network (it's the number 1 Social Media site in Japan, ahead of Facebook) but with only 140 characters, which is Not a Facebook. And opening up the possibility of a new "me too" SMS service which does integrate. 

Add to that alienating the whole world of developers who've helped get Twitter to where they are - and they're not happy about it. Not one bit and boy are they blogging about it. Twitter would do well to remember how quickly things can turn against you and the bottom line is that the internet is an "open" network not a closed one. 

It could be viewed that in an ambition to generate more revenue before an IPO, customers are being squeezed. Despite this quote "I'm never going to optimise for short-term revenue at the expense of user experience", said Twitter non-founding CEO Costolo recently, at a Wired Conference in NYC. 

He took over when the three Twitter founders departed although founder Jack Dorsey returned in March 2011 with whom he says he "works well". Jack Dorsey (media person of the year at Cannes 2012) seems to spend a lot of his time though, with his other venture, Square. So why did he come back? Optics?

There's a dramatic push on at Twitter to start making some money and in advance of an IPO (or indeed a Google trade sale?). It might be some way off just now, but it's coming. An IPO to make money for the Twitter shareholders possibly to the detriment of Twitter itself.

The question will be whether the changes and new money-making attitude will have a detrimental affect, notably on users, who are the very reason Twitter exists. In a Boardroom, a drive to make money might rule customer principles. I've seen it before and certainly these changes reduces the profile of Twitter on third party apps like Linkedin.

If it does alienate users, it will all have been for nothing.
Especially, and ironically, if an IPO is on the cards.
The 'P' in IPO stands for Public.

One hopes its NASDAQ ticket won't be TWIT.