Tuesday, May 31, 2011

Twit or Else...

Dick Costolo was in full flow. The chief executive of Twitter – installed after a brief power struggle in the autumn of 2010 – was outlining his unifying vision for the company's product at the Mobile World Congress in Barcelona in February. "Our mission," he said, "is to instantly connect people everywhere to what's most meaningful to them."

As mission statements go, it is up there with Microsoft's "PC on every desktop" and Google's "organise all the world's information and make it useful". What Costolo did, in an impressive talk, was to pull out examples of how Twitter is used socially by everyone. He put up a picture of a sunset posted by a user who had added the comment "What a day … in more ways than one". What does that mean? "Maybe a friend or loved one knows that there's more meaning than that in it," Costolo noted. The idea that tweets can carry more information that what is simply encoded in their 140 characters – that they have extra value to the user through their context – was powerfully made.

Injunction application

If anyone needed reminding of that, the timing of thousands of tweets mentioning Ryan Giggs earlier this month – curiously just as the law firm Schillings went to the High Court over an injunction taken out on behalf of an unnamed footballer – should have disabused them. Costolo's case is proven: tweets are social. And Twitter has been proven to have enormous power. Though the odd point is that the company doesn't wield it in its own right; it can only go where its users go. The flock decides the tweets' direction.

The tough question Costolo now faces, as Twitter looks back at a month where its UK audience leapt by 20%, as people logged on to the site to try to find out the details of so-called "superinjunctions" (more accurately, anonymised injunctions), and where the company's name has had the invaluable free publicity of being on every news bulletin and newspaper front page, is: how can he turn that into a thriving, profitable business?

It's now five years old, and has an estimated 300 million registered users worldwide, with new signups running at about 600,000 per day.

By the time Google was five years old, in 2002, it was making more than $430m per year from AdWords – the automated system that lets advertisers bid to appear beside specific search results. It had introduced the system in 2000 – though it was hardly innovative; serial entrepreneur Bill Gross and another company, LinkExchange, had both had the same idea in 1998. AdWords is the money machine that powers Google.

Twitter hasn't had the same benefit of bootstrapping itself to income on pre-existing ideas, and doesn't seem to have the same money machine, at least, not that it has revealed.

It has some deals to generate income: Google and Microsoft's Bing search engine buys its real-time feed to go into the search results. Advertisers can buy "promoted tweets" (which appear on users' pages, in the hope of going "viral") and "promoted trends" in the list of "trendings topics", and simple AdWords-like ads that appear when users search on topics.

But none of this looks like enough to make a really vast and scalable business in the longer term, says Ross Taylor, group digital director at the London-based marketing services company Creston Group.

"A few years ago, before Twitter, we did look at the opportunities for using the leftover space in text messages – which is typically 80 or so characters – for sponsorship and ads," Taylor says. "But it fell apart because there's no real value or need for it for the consumer."

Contrast that with Google's AdWords, he says: "80% of transactions begin with a search, so you can see how Google makes money. For social networks like LinkedIn and Facebook, you can see the possibility for brands to get into the space and benefit. The point is that people are using Twitter in a different way from how they're using LinkedIn and Facebook. It's not social, it's a small way of sharing small fragments of news."

Certainly journalists know that: in the words of Neal Mann, a freelance producer for Sky News speaking at the News Rewired event on Friday: "If Reuters is your example of a solid news wire, Twitter is Reuters on acid, crack and cocaine." The ability to query a huge number of people all at once from locations all over the world – or as locally as you like – is utterly addictive.

But that's not the same as being crack (or cocaine) for advertisers. "I love Twitter, but it's like a piece of plumbing," says Taylor. "I can't see how they're going to be able to generate significant revenues from the type of clients that I work with, for example." (Those clients include Walkers Crisps, for which Creston has run Facebook and Twitter campaigns.)

He thinks there might be some value in the "data sale" model: "understanding and collecting how people are sharing things is going to be valuable. But it isn't going to be as valuable as Facebook's opportunity to sell space to brands. It's an adjunct to a total experience, rather than driving total engagement."

There's something else too. Twitter represents, perhaps better than any (legal) internet company so far, the collision of the digital age and the sovereign state. It's an almost perfect enunciation of John Perry Barlow's 1996 "Declaration of the Independence of Cyberspace", which (ever so pompously) begins "Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone".

That's certainly how Twitter seems to have been reacting since the high court began considering a court order that would demand to know the identity of "person or persons unknown" who posted details on it which claimed to blow open a number of anonymised injunctions relating to footballers and other celebrities.

Predictable effect

A number weren't right, but the idea that the injunctions could be breached so blithely had a predictable effect: the judges were outraged. Lord Judge, the lord chief justice, asked (rhetorically?): "Are you really going to say that someone who has a true claim for protection perfectly well made has to be at the mercy of modern technology?"

To which one refers M'Lud Judge to the case of Barlow, 1996.

In fact Twitter, with its ability to work even on "feature" phones, is exactly the sort of internet phenomenon that can delight and dismay governments of all stripes. China bans it. Its ability to rapidly spread information had some limited effect after Iran's disputed elections in 2010 (so much so that the US State Department asked its engineers to delay scheduled maintenance), and arguably during the "Arab spring" uprisings. Western governments were Twitter fans in these instances; it's only when its snappy bursts intrude into the bulwarks of their own establishment that governments stop liking it, and begin murmuring about "legislating" and "controlling" the internet, as Nicolas Sarkozy did last week at the G8 summit.

But will Twitter really be able to defy local legislation? Its terms of service include the key boilerplate that: "You may use the Services only in compliance with these Terms and all applicable local, state, national, and international laws, rules and regulations."

If the person who posted the supposed injunction-busting tweets is based in the UK, they could be in trouble. If, however, they are in the US, things get more complicated: local law there might ignore English injunctions.

Global business

Nick Armstrong, a partner in sports and media at the law firm Charles Russell, thinks that becoming familiar with the legal landscape is going to be part of the process of maturing for Twitter.

"It doesn't matter whether you're providing a way for people to gossip or making cars or cigarettes, each jurisdiction has different sets of rules. But any global business faces this any day of the week. It's particularly difficult, I suppose, if your raison d'etre is giving people a platform to say whatever they want."

For Twitter, a key moment may be whether, and how, it complies with any court order to reveal what it knows about the identity and location of "person or persons unknown" who tweeted those supposed injunction-breaking identities. That could be crucial to how it is perceived publicly: either as a tool of the judiciary, or as an organisation that protects itself and its users. A confrontation with English courts was probably not what Costolo, pictured left, was expecting when he planned the year ahead, and just as the company sets up shop and sends its first executive, Tony Wang, to the UK.

But for every growing company that hits an inflection point, there comes a time when something unexpected happens: how you react can make or break you. The next few weeks could be crucial to whether Twitter is seen as an internet hero – or villain.

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