The Coming End of YouTube, Twitter and Facebook Socialism
Thank God for Tech Moguls Who Redistribute VC Wealth So We Can Cybersocialize Freely. For Now, That Is.
Twitter founders Ev Williams and Biz Stone should thank God it was just a cardinal, and not the pope.
Last week, according to the Times of London, Cardinal Sean Brady of Ireland told the country's Catholics to "Make someone the gift of a prayer through text, Twitter or e-mail every day. Such a sea of prayer is sure to strengthen our sense of solidarity with one another."
It's telling that Cardinal Brady grouped Twitter with texting and e-mail. The former, of course, is a paid service and a massive profit center for cellular carriers around the world, and the latter you also pay for, albeit indirectly, as a service bundled with your monthly internet access or by allowing yourself to be subjected to advertising. (As a Gmail user, I decided to see what would come up when I e-mailed myself the Lord's Prayer. The ads Google served included ones for BeliefNet and Don Helin's paperback pulp thriller "Thy Kingdom Come." Ka-ching!) But when it comes to Twitter, we not only don't pay, but we all take it for granted that somebody's going to keep footing the bill for the rapidly expanding server farms needed to process and store zillions of tweets per minute.
It's sweet, really, that venture capitalists have ponied up millions so that we can all keep tweeting. It's also more than a bit scary. Because more and more of us are increasingly addicted not only to Twitter, but to other services that lack workable business models. What happens if the "dealers" who feed our habits disappear? (It's been known to happen. Last week, for instance, Yahoo announced it was shutting down last century's hot social-networking-esque service, GeoCities, for which it paid $3.5 billion in 1999.)
I've been thinking about all this a lot since I wrote, a few weeks ago, about how Susan Boyle has been on what I called the "Google Dole" -- her fame fueled in a nonsensically nonprofit manner by Google's YouTube unit, which hemorrhages cash serving up too much video with nowhere near enough advertising support. (I'll again refer you to Benjamin Wayne's Silicon Alley Insider piece, "YouTube is Doomed," which deconstructed the recent Credit Suisse report that puts YouTube's estimated 2009 losses at nearly half a billion dollars.) You'd think a clip of Boyle singing a song from "Les Misérables," one of the most popular musicals of all time, on one of the most popular TV shows in the world would be semi-monetizable. (I mean, geez, at the very least stick a pop-up overlay on that video with a link to the "Les Miz" soundtrack on iTunes.) But no. Adam Ostrow at Mashable further proved my point with his piece, "Susan Boyle Video Profits: $0," which explained that disagreement between "Britain's Got Talent" owner ITV and YouTube over pre-roll vs. overlays prevented ad placements in Boyle's YouTube streams.
And then last week The New York Times reported about the hazards of international expansion for the likes of Facebook. Getting million of new users in the Third World, it turns out, really sucks, because Facebook will never really be able to meaningfully monetize those eyeballs. It's tons of cash out (bandwidth, data storage, personnel) with little hope of cash in.
Weirdly, some of the management at these companies don't even seem to be trying that hard to make money -- a consequence, perhaps, of still being awash in millions of dollars of VC money ("venture charity," as I like to call it). In fact, Abbey Klassen, Ad Age's digital editor, tells me that she once heard a Facebook exec joke to an agency exec, "Didn't you know we're a nonprofit?"
I'll go one step further: They're socialists! OK, yes, I'm using the dumbed-down definition of socialism championed by numbskulls like Sarah Palin, but regardless of the finer points of economic theory, you've got to admit that at some level the boys at Facebook, YouTube and Twitter are actively choosing to redistribute the wealth. They're taking money from venture capitalists and deploying it so that millions of people far beyond Silicon Valley can get something for nothing. Entertainment, information, and self-marketing opportunities, mostly.
And, oh yeah, a sense of "connectedness" -- cyber companionship -- which makes this particular era of VC-wealth distribution all the more ... touching. (Let's all be friends -- on someone else's dime! Let's all be perpetually jacked into the hyper-insta-now global hivemind of human consciousness -- for free!)
I am so appreciative. Seriously. I love YouTube, I've made some interesting connections through Facebook, and I enjoy Twittering. (Last week, for instance, I tweeted about an astonishing bit of information I came across in Britain's Daily Telegraph: YouTube "reportedly uses as much bandwidth as the entire internet took up in 2000.")
But I also know it can't go on like this. The digital Robin Hoods can't keep redistributing the wealth forever, because eventually the wealth runs out. Investors get sick of propping up private ventures that don't have viable business models, and shareholders of public companies, like Google, get cranky about flushing cash down the drain.
So what can we do? Not much, I suppose, other than enjoy it while it lasts -- and maybe twitter a prayer for VCs everywhere.
~ ~ ~
Simon Dumenco is the "Media Guy" media columnist for Advertising Age. You can follow him on Twitter @simondumenco
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Allan Hoving
PayCheckr.com
Not sure why an aggressive, consolidated subscription model is off limits, though. For every two consumers you might lose, perhaps one will pony up $9.99 a month to have access to all their "virtual networks."
There's no power in numbers here, Facebook is proving that.
That said, it's refreshing to see someone make a simple point, once in awhile. Nice job.
1 - An upload fee would give immediate revenue.
2 - An upload fee would cut down on the frivolous uploaders of cat puking videos and so reduce bandwidth costs.
3 - An upload fee would decrease the amount of content against which no one advertises. Not sure how much. I am assuming that serious video producers would still pay to upload and would be creating more advert-friendly content.
4 - A monthly, weekly or daily viewing fee would also bring immediate revenue. This could also lessen the importance of advertising.
5 - Google/YT could usher in a new era of micropayments based on using their already existing Google Checkout code. Yes, this could require some modifying, but it would begin to use another one of their in-house assets.
6 - Google/YT could lead the way into showing the rest of the world how to make money off of online video!
So what if their use drops off! If I were YT I would be happy to make some amount of $$ off a smaller user base rather than my current half billion loss off a huge user base. The users that go elsewhere become someone else's zero revenue problem.
When it all collapses, it'll fall faster than Wall Street.
I'm no Harvard MBA but giving out mortgages to people with bad credit seemd like a dumb idea to me.
Starting a business without any idea how to make money from it never sounded too swift either.
Until then, I'll keep chuckling at dogs on skateboards for free.
A large portion of the younger social media crew believe everything on the interent should be free. Changing their mindset will be difficult if not impossible.
http://www.proudtoliveinamerica.com
tic, tic, tic.
Why is our economy failing? Gee I dunno, but I'm sure someone on Twitter has the answer.
Love the article. It's spot on. The only problem with upload fees or putting banners and pop-ups on Twitter or YouTube is that the masses (no pun intended) will flee. They started as a free site and that's how we think of them now.
YouTube and Twitter never had a revenue model from the start and that will be their downfall. That is why we started www.AdJack.tv, and yes we have a revenue model built into the website.
From a user's perspective, it's a fun site to view their favorite commercials and interact with their favorite brands. For an advertiser, it's a clean permission based site for them to market and gather real untarnished demographic data on our user's habits. Oh, by the way, the analytical data and click through are currently free to the advertiser and the advertiser sets the spending limit and cap for their ad campaign.
If the VC world out of love with Twitter and YouTube, send them our way. We have a working revenue model and they won't be just throwing money into the collection basket.
Thanks,
Patrick Houlahan
VP Business Development
www.AdJack.tv
http://theshermanfoundation.blogspot.com/2009/05/tyranny-of-masses-1-billion-internet.html
""The common championed belief is that digital tools and technology will democratize creativity, give voice and presence to individuals and enable the formation of communities around niche interests and points of view. The only indisputable observation one can make is how powerfully destructive these new technologies have been to traditional industries and social structures. Any claim to their ability to construct new and better alternatives would be premature. I am being to question, particularly as populist participation grows, whether modes of digital and virtual interaction tend toward a spirit of sharing and cooperation or are better suiting to pursuing self-interest and a tendency to devolve into squabble and antagonism. The biggest problems with comment threads is that they quickly stray off topic and devolve in precisely this manner. ""
My company, Vimation (www.vimation.com), has a very simple monetization model for online video, and yet most everyone we meet with wants to go the free route. The pending questions is, "should I pay for bandwidth and be able to make money now, or should I upload to YouTube for free, use their distribution, and then try to make money once I have an audience." All the independent production shops are using these free media outlets to promote their content, but very few are willing to make the investment in the early stages of a project so they have not only a monetization model, but they also have data on who the hell is watching and interacting with their content. They're not going to get that with a free service.
The way to get people to pay for content or an experience is by making it more relevant. If I'm watching content and being served up ads for books I don't want to buy, movies I don't want to see and products I don't use, there's no value in that. With our platform, we use everything we know about a person, we serve up advertising that is not invasive, and the interaction rates are phenomenal with our monetization efforts.
If you're looking for ways to make your content work for you, email me at eric@vimation.com.
Advertising sales can't support and feed us all. Robin hood has a limited supply of Royals to rob.
Those who think that there is a free lunch might find themselves at the soup kitchen some day.
I feel sorry for the investors who are required to feed our social cravings.
I will not ask them to feed my venture with the non-profit business model!
I am not a tax expert, but given the tax bracket many VC's belong to, there may be better tax advantages to a failed investment than a charitable contribution.
Fewer Non-[rofit start-ups fail than profit based start-ups because they are typically fueled by leaders passionate for their cause who can typically find donors equally interested in supporting the cause. Shaping culture can be terribly satisfying, more so than any profit. It may be some VC's are looking for more than profits in backing these launches.
http://twitter.com/jack_welch
It said - Whoops! That's Italian in Chicago
I thought about if for a minute and decided to go to his Twitter page. Maybe I took this out of context. After further inspection, it appeared to me that he just made a joke about Italians in Chicago.
This is a man who I always had a little compassion for. He went through a messy divorce, his personal finances and dirty laundry were all laid out in the WSJ for the world to see. He was joked about on Letterman, Leno and all over the internet. But when I read the Italian reference, it made me a little mad. So I quipped back to Jack on Twitter - "Dry cleaning. That's free when your Jack Welch. My family is Italian from Chicago. I have a whole book of Jack Welch jokes."
The Dry Cleaning reference is based on reports that his retirement package from GE includes among other ridicules things as his dry cleaning. This is a day when corporate CEOs are getting called out for having private jets. He responded back, "Thanks so much. Which is your favorite?" (joke). I figured, today is Cinco De Mayo so I Twitted back, "Cinco De Nero. Mexico renamed today in honor of Jack Welch hoping he would stop by in his retirement jet to revive the economy."
No response yet from Jack. So goes the Twitter world.
Rodney Mason
CMO, Moosylvania
The Great State Of Design
www.moosylvania.com
Bravo-- Dead on again. I ask everyone who thinks that subscription models or upload/download fees will produce revenue to remember that one of the horrible efficiencies of digital social interaction and communication products-- actually anything available for sale or use through the Internet-- is that one company's profit center is another's loss-leader. So I expect there will always be someone offering "unsustainably" free stuff.
David Langan
www.gcgames.com
Does including the words "Twitter", "YouTube", and "Facebook" in the title increase pageviews? I'm assuming the answer is yes. Does it increase comments? It seems like it.
So good job. Somebody's monetizing :)
Susan Boyle has a lot to learn. Or maybe she's ok just being a singing megastar from a village(s).
http://www.socialnerdia.com
You're known as the "Media Guy." If you're going to write about social media and where it's heading, you need to become known as the "Trust Guy." Social Media builds Trust. A currency that old media cannot deliver. There are plenty of dollars and smarts in the world who understand the value of Trust. That's why Facebook and Twitter have a future and old media doesn't. That's why it's rumored today that Apple is in talks with Twitter.
http://blogs.barrons.com/techtraderdaily/2009/05/05/apple-to-buy-twitter-and-electronic-arts/
Apple set to buy Twitter for £460m?
The only question is: would it be called Twapple?
Apple (AAPL) has nearly $29 billion in cash and securities piled up, and the total rises every day. Could they be preparing to go on a shopping spree? While history would suggest otherwise - the company has zero history of making large acquisitions - the rumor mill today has the company in two theoretical deals.
Valleywag writes today that the company is close to buying Twitter for as much as $700 million. The blog asserts that "A source who's plugged into the Valley's deal scene and has been recruited by Apple for a senior position says Apple and Twitter are in serious negotiations, with the goal of unveiling a deal by June 8, when Apple's annual Worldwide Developers Conference launches in San Jose." I might point out that the WWDC is not in San Jose, it is in San Francisco, as usual.
Rodney Mason, CMO
Moosylvania
The Great State Of Design
www.moosylvania.com
Maybe these social networks are really 'public goods', that little remembered or studied chapter in econ class.
The railroads used to be private businesses, but failed as public transportation and had to go to state provision as public goods. These services may be public goods in nature, necessary for the way we do business and communicate today, and perhaps should be supported by some kind of public trust like PBS. Open source is a great way to do this today for this kind of infrastructure stuff.
Lots of networked type infrastructures can't make it as private businesses, DARPA and the Federal Highways are good examples. Private toll roads went out of biz a long time ago. British Rail privatized railroads in the 1990s and now have the highest accident rate in Europe. Even long-distance had to be a monopoly to get built with AT&T. Even MCI was built for US government DOD by private investors yes, but cronies to Congressmen and Generals who got promised their monopoly powers they enjoyed for a long time, and then they even got AT&T divestiture and de-reg in the 80s so they could compete with Ma Bell in Long distance. DOD monopoly wasn't good enough for them. Which congressmen where friends and family shareholders in that IPO?
Going to the telcos is a really bad idea because they are unregulated monopolies now and provide terrible terrible service. They would wreck twitter, facebook et al and why should they get their hands on something they never could have built themselves???
Twitter and Facebook should come up with value added services that they can charge for for a certain tiered audiences, or businesses for closed collaboration or community networks who will pay, like LinkedIn or LINUX did.
That will take ingenuity on their part, but I trust them more than I trust any telco today who all enjoy monopoly, duopoly or 'weak' competition privileges and provide lousy service stifling innovation in the whole industry and pushing the US down in the global rankings for preparedness for innovation. Check out http://www.itif.org/index.php?id=226 to see what happens with monopolies, duopolies and 'weak' competition in telcoms.
I'm sure the people who are curious and open minded, who are fed with information and inspiration by following the right people - are more than willing to pay/donate some money freely with an amount of their choice to keep twitter alive. I definitely would do so.
Though I'm not saying that all innovative approaches to create brand communication inside twitter should be banned - but twitter isn't supposed to be overtaken by cheap random and annoying banners. Cause then twitter is dead faster than you can tweet.
I like albyfleugzeug's allusions to historical precedents ... and wonder if there is a case to be made for a Web 2.0 complement to PBS ... perhaps PNS (the Public Narrowcasting Service).
I also like ssset's comments, and wonder whether something like Flickr or LinkedIn's "professional" level memberships - for which they charge a nominal fee in return for added features not available to non-paying members - would work in this context.
For that matter, I wonder if PBS - which is [also] suffering from what seems like a growing conviction among some segments of the U.S. population that "information wants to be free" - could benefit from a revised revenue model.
Take one million free users = revenue equal zero. Costs high. Profitability verrry negative. VC excitement level high.
Impose a charge on those users ($4.99 per month) and you lose 98% of them. Total user base 20,000. Total revenue $1,200,000 million. Costs moderate. Profitability about $200,000. VC interest -- Nil!
I'm sure Facebook, Twitter and all, don't want a revenue model at all, because they would be a different propositions they lost 90+% of users.
Services like YT & FB could offer special services for companies... not simple channels / fan pages with no added value, but really cool special features for a monthly fee.
Also - In the user agreement it states that facebook will gather information about you from other sources including newspapers, blogs, & instant messaging services.
Now, what most people fail to understand is that FaceBook, YouTube, & Twitter were never created or even intended to be a business or revenue generating platform. The initial reason for the Web 2.0 and Social Media Push was to provide a means for the average internet user to freely generate & monitor the content on the World Wide Web. The internet would not be controlled by companies or the search engines, but by the common people or the prevalent culture.
Unfortunately, this idealconcept will eventually backfire if they don't find an ROI model! We must honestly admit that the cost of maintaining these FREE services with their huge amounts of information & media is overwhelmingly high!
In addition to this, I haven't see the internet really evolving in any manner that's beneficial to society, other than seeing more worthless, nonsensical crap on these sites that do nothing but pull us further backwards creatively and morally.
So, with that being said, I totally agree w/ Simon that these social platforms need to come up with a revenue generating model quickly or they'll fall by their own hands.
Frank
http://www.absrocketpro.com
is Twitter just another CIA - NSA black ops global surveillance project designed to keep tabs on people and waste more time for people who have too much time on their hands anyway?
Is Union Square a CIA cutout like q?
Any inside dope is welcome...
Hey, maybe they can ask for a bailout - everyone else seems to be :-)
Ben
http://www.howtobuildgolfclubs.com
Great article! I guess its easy to take for granted using services like YouTube, or Twitter, when it doesn't cost us a dime to do so. So often people forgot that bills and payrolls need to be paid on time every month and we're quick to jump on the newest and hottest Social-Media network (does anyone remember MySpace?). It will be interesting to see where the next 3-5 years will take us...
Best,
Gaston
http://www.Ultimate-Resell-Rights.com
jim
Redmond
http://www.buildingmaintenanceoftoday.com/
Kirschan
http://www.fdiinsider.com
http://www.squidoo.com/Financial-Destination-Review
Jassie
http://www.simplydrinks.com.au/main.htm
http://www.aquaman.com.au/Page/water-filters-qld
Nice post, keep it up.
Business Plan Writers
You are right , its almost imposible to chage thier mind set.
http://www.bizplancorner.com