Twitterverse reality check and lessons learned

You’ll probably never know it by looking at the final result, but I’ve been working on this post, at least thinking about it, for several months.  I’ve been reluctant to publish it because every time I start, it tends to sound like a rant and that’s not what I want this to be about. As anybody reading me knows, I’m not afraid to rant, but in this case that’s not my objective – I really just want to share some lessons learned in the hope of informing the dialog.

Some of this may be obvious “well duh” sort of stuff for others out there who may be a lot smarter than me. Hopefully it won’t all be that way.

As many of you may already know, over the last several years, I’ve worked on and otherwise participated in a number of side-projects, including:

• Phweet – a phone call in a URL
• Taglets – the story of tagged things
• Twitmart – Twitter Marketplace for social classifieds
• SuperTweet.net API – An Answer for Twitter OAuth-pacalypse
• TweetPress (140plus.com) – a free Twitter blog at http://YOU.140plus.com

Each of these can be considered a failure, depending on the metric or dimension one examines. Except for SuperTweet.net and TweetPress, all of them have since been shut down. Each of them have been a disappointment, to some degree or another, for me, personally. However, they also each provided various positive rewards, in addition to the sometimes painful lessons learned.

Metric 1: Popularity

Certainly, with the exception of SuperTweet.net, they are all failures in terms of popularity – they never gained any significant traction.

With the exception of Taglets.org, each of these services require a Twitter account – the only way to use the service is using your Twitter account. This was an intentional decision, where these services were supposed to be integrated with and tightly coupled to Twitter and your Twitter social graph. I don’t recommend such a strategy for anything real you may be doing. It’s fine for side projects like these, but it’s a bad decision for something you might hope to make into a business and you only need one reason for that, according to Pew Internet:

8% of online Americans use Twitter

So by limiting your target market to only those using Twitter, you are automatically excluding 92% of potential users. And that’s the number as of December, 2010 (according to Pew) at a time when Twitter was claiming over 150 million users.  It was even worse, much worse, back when we released Phweet in 2008 when Twitter had only a few million users.

There are other reasons to avoid putting too much emphasis on Twitter as a social network (which even Twitter says it is not), some of which I cover below, but obviously the 8% problem is all you really need to know.

Opening up your site to Facebook users will expose you to about ten times more users. That makes good business sense – however, in my case, I don’t particularly want to help Facebook lock-in more users and more sites, so I have elected to not implement Facebook Connect – a bad business decision, but one I accept on principle (and admittedly more weakly, on long-term business strategy grounds). I don’t encourage anyone to follow my lead on that, unless you also are doing so for something other than sound business reasons.

It’s too early to call regarding TweetPress one way or the other, but given that it is Twitter account-based, it suffers from the above problem of excluding the lion’s share of potential users that don’t have Twitter accounts, right off the bat. The service has not received any TechCrunch, GigaOm, or other such “juice” as Phweet and Twitmart did, and is only being promoted through the limited reach of my own followers and a few friends and others that have started using the service. As a result, growth has been slow, if not almost non-existant. Either way,  it serves my needs and it continues to be a wonderful platform for experimenting with different technologies, mashups, APIs etc. I have no plans to shut TweetPress down, regardless of whether it ever achieves wide adoption, but it’s always more fun when such services are embraced by a larger community.

Twitmart was being used by a few users, but it never even started toward the goal of helping users build a trading community with their Twitter Friends and Followers. Nobody used it that way. Instead, it became little more than a vehicle for spammers, so we shut it down.

As noted above, SuperTweet.net isn’t a disappointment in terms of adoption. It has been steadily growing since Twitter shut off Basic Authentication on the API. Unfortunately, most the users are parasites, contributing nothing in return (with notable exceptions, @ae6rt @TheDarkNighty and a handful of donations) – certainly it has not produced the kind of community of support I had hoped it would (naive, wishful-thinking on my part). Update: I have to take this statement back – there has been a significant upswing in community support for SuperTweet.net – thanks folks.

About the 8%

This brings me to some of the lessons learned about the 8% of people using Twitter. Let’s look at the Twitterverse in more detail.

With each of these services, we have learned something about the evolving Twitter user-base. And as Twitter approaches double-digit penetration into the mainstream, it may also provide some lessons about the Internet population at large.  We have seen this pattern before. The early adopters skew the personality of a service in the beginning. We saw it with Usenet, way back in the late eighties, and the pattern has repeated across many services over the years, right on up to Quora today.

In the beginning the services are populated with users that are smart, helpful, active etc. – there is a real community and it’s a regular utopian bliss. But then the real world steps in. And guess what, not everybody is so smart or sweet and nice. Some come from harder backgrounds where making a living might mean $1 a day. There are sleazeballs of every flavor with all kinds of motivations. If there is a way to exploit the service for their own personal gain, they find it, especially if it costs them almost nothing to do it (whether it’s the cost of a Usenet post, email, or a Twitter status update).

And Twitter is no different. As it’s gone from under a million users to hundreds of millions of users, the flotsam and jetsam of the population came along. As with email, the spammers and the like may be only a small fraction of the total user-base in number, but they can have a tremendous impact on the overall system. And there is a gigantic gray area of behaviors in the name of “social media marketing” and “SEO” going on on Twitter that sometimes cross the line. I read a business plan recently that literally referred to Social Media as the “advertising mecca of the future.” I suspect such is a common view among budding entrepreneurs.

One doesn’t have to look very far to find a huge array of consulting firms, PR agencies and others that will make all kinds of claims about their “secrets” and expertise in Social Media Marketing, often charging exorbitant fees – I shouldn’t even have to say it, but very few of them provide any value and most the time, engaging such a service will end up doing more harm than good by damaging your firm’s reputation.

Anyway, while I doubt the percentage of Twitter users that fit the above abuser category is very large, their presence is felt loud and clear. And they are the first to try to “game” any new system or service connected with Twitter, as well as Twitter itself of course. These are the folks that jumped on Twitmart and, I have to say, soured me on the project, and on Twitter as an ecosystem to a degree.

The Twitter “social graph” is a joke

In the bright young days of Twitter, a lot of us thought it might be a new kind of social network. And it was, for a while (and still is for a small percentage of Twitter users). But once Twitter started to aggressively market the service, attract celebrities, and celebrity stalkers, any chance of a meaningful social graph were put to bed. As Pew and other research has shown, there is nothing mutual in those relationships and no community or friendship aspect to them. Even Twitter finally acknowledged last year that they are a media company, not a social network.

Further, the Twitter Home Timeline, the stream of who you follow, has also become part of the joke. Most people that have a ‘reputation’ of any kind also follow a lot of people out of a sense of duty – they feel obligated to follow people so not to send a message that “we aren’t really friends,” even though they don’t really care much about that person’s tweets.  Their “following” list is so polluted with such connections, they really never follow it at all.  I had a high-profile Twitter guru tell me recently, in essence, that I’m not a serious or typical Twitter power-user because I don’t follow 500+ people. I brutally manage who I follow because I still actually read my timeline, basically every tweet in it. If I followed 500+ people, I may as well not be following any of them, because I’d never see most the tweets in that timeline/feed. But that’s exactly what a lot of people do on Twitter, making their home timeline, and thus their social graph, meaningless.

The implication is that any Twitter-related service that somehow relates to the social graph is working from bogus data and won’t be of any use to the largest segments of Twitter users, those for which the social graph is almost entirely meaningless.

Twitter is less real-time than you think

For news and events, the Twitter consciousness, the live timeline (fire hose), can provide wonderful insights as events happen. This is the broadcast platform role that Twitter serves very well.

In terms of real-time person-to-person conversation, however, Twitter is hit and miss, mostly miss. With Phweet, we discovered that most people don’t tune in to Twitter all that often or consistently. Here are some other issues that impair Twitter’s ability to serve as a communications platform:

1. Many connections aren’t mutual, so direct messaging fails
2. Twitter settings are too complicated, such that most people never figure out how to set up real-time notifications
3. Messages get lost in overflowing timelines
4. The 140 character limit kills deep conversation, or causes them to move elsewhere

Many services have emerged to try to solve the conversation problem on Twitter and they have all gone nowhere. In my opinion, Twitter as a person-to-person or small-group conversation platform is a non-starter.

Summary

In the end, Twitter is basically like a zillion RSS feeds overloaded with a messaging system (actually two messaging systems, @ messages that are semi-public, and direct messages that are email) wrapped around a search engine, and hooked in to SMS (at least in the US). Probably the original description of Twitter as a “microblogging service” is still the most accurate.

In short, people use Twitter to share stuff. Unlike a Facebook or LinkedIn style social network, tweets are generally shared with the world at large, not just ones mutual friendships. When, or if, people see what you share depends on a number of factors, not just whether they “follow” you or not. They might see your tweet as a search result, due to a retweet, as part of a Twitter list’s contents, or because the tweet was directed to them via @ messaging. And the fact that they follow you is no guarantee they will ever see your tweet, far from it.

All these things are important to keep in mind when conceiving applications or services that in some way work with Twitter.

So can you build a business, or even a viable service, around Twitter, exclusively? I don’t think so. Oneforty has done it (to whatever degree they are successful) and of course some Twitter clients have done alright (many have not done that well, especially once Twitter themselves became a competitor). Even though Twitter claims 200 million users, bear in mind that only 8% of online users use the service, and of those, only a tiny fraction make up the kind of users that can help build value in a community.

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Apple’s great Mac OS X bait and switch

It’s been almost three years now since, with great fanfare , I switched from a UNIX Workstation to a Mac as my primary desktop workstation. That change was many years in the making – I worked with Mac OS X along side my trusty UNIX workstations for several years before making the complete jump.

Apple baited me, and a lot of us Linux and UNIX developers, with the charm of a real UNIX OS underneath – more or less everything one gets with a typical modern Linux distribution simply by opening a Terminal window – while being wrapped in a nice modern GUI supporting tons of “mainstream” Apps, like MS Office and Adobe Photoshop. No more dual-booting. No more firing up a Linux VM to do development. It was glorious, while it lasted…

With Apple’s deprecation of Java, with no warning at all last week, we have to accept that the “switch” part of the bait and switch may now be on. As Paul Rubens says in Apple Tells Developers, ‘Mac OS X, Hold the Java’:

If you’re a developer that relies on having access to Java and you happen to like the Mac platform, then don’t expect your treatment at the hands of Apple to be any better. Apple is making it quite clear that it’s not the slightest bit interested in repaying your investment in it.

Around the net, this is being passed off as a minor issue, but as The Register notes:

…the further implication is that [Apple] will halt all development of Java for Mac. If this happens, it will be left for someone else to provide a viable version of the platform for Macs. And if Apple doesn’t open source its existing work, that’s no easy task.

…We stand by our claim that if Java suddenly disappeared from all desktops, relatively few people would actually notice. But those few include Java developers, which includes, well, Android developers.

That may be what Apple’s real motivation is here, to somehow attack Android (and further alienate Android developers in the process).

No matter what their motivation, the fact is, Apple appears to be giving some of their most persuasive evangelists the finger. It’s difficult to say how many former UNIX nerds like myself jumped to Apple over the past 10 years and how many countless “regular users” they brought with them, but regardless of the actual absolute number, there is no doubt that this segment was a critical factor to the turn around of Apple’s image from “toy” to “serious” machine. Apple has probably decided that they don’t need us anymore, and they could be right. You never know though – beware the power of the nerds and geeks, I always say.

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Is it time to drop the Twit, Tweet, etc. from your App Name?

There has been a storm of sorts this past week surrounding Twitter, their developers, and the “ecosystem”.  It started with some comments from VC Fred Wilson followed by comments from Twitter CEO Ev Williams in a New York Times interview, and culminating in Twitter buying Atebits and thereby creating an official iPhone app: Tweetie.

This has, of course, created quite a stir in the Twitter development community, with accusations that Twitter is “eating their young” and pushing third-party developers out of the market.

These recent events have really brought home for developers the risk that when building on top of someone else’s platform, they could decide to compete with you head-on. Of course we’ve seen this many times in the past, most notably with Microsoft, but also with Google, Cisco, and many others. Those seeking funding for Twitter mashups often struggle with this push-back from potential investors. Perhaps now, that will become even worse and it will be even harder to get funding for a Twitter-based product or service.

That’s not good news for Twitter. While their platform is popular, with a claimed 50,000 developers, it’s still relatively small, compared to Facebook with 500,000 or Apple’s 185,000 apps in the app store. Furthermore, both Facebook and Apple’s App Store have spawned lucrative breakouts like Zynga, Tapulous and PopCap, while Twitter’s ecosystem has yet to produce a similar hit in terms of revenue, to say nothing of profit. Even among the most popular Twitter apps with lots of users, there are plenty of companies burning cash, but few producing any.

So, is it time to drop the “twit” or “tweet” from your brand name and become less intricately linked and integrated with Twitter and the Twitter platform? Or is this a perfect time to show loyalty to Twitter in the hope that they reward you for that loyalty? To Twit, or not to Twit. That, is the question.  What do you think?

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Rich Buchanan out at Ooma

I missed this in February via, hdvoicenews.com

By Doug Mohney, on February 8th, 2010

After two years as Ooma’s Chief Marketing Officer (CMO), Rich “The Dude” Buchanan is departing the company for another project.

Makes one wonder who is left there.

I understand the company has raised about $61 million and have obtained approx. 100K customers (for which they must provide phone service for life). No one outside the company knows how much of that money they have left – rumors suggest they have burned though over $50 million, but know knows.  Hard to say when they’ll next need more money or how hard it will be to get more or how close they are to positive cash-flow (if it costs them $600 to get a customer that pays them $300 and brings liability of lifetime service, not sure that line ever crosses into the black). I was pretty amazed to see them raise as much as they have over the past few years, and especially last summer when money was really tight.

But man, $50 million, if that number is close to reality – Wow.

Apparently some of the early investors took it in the shorts – the most recent round of financing was based on a reported $30 million valuation (note that amount is less than they have raised).

BTW, by most accounts, Ooma has very happy customers in general and their voice quality is generally regarded as being very good among VoIP services.  It might be one of those deals where the customers “love them to death” kind of like WebVan.

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Skype grossly over hyped, even with the Verizon deal

Ok, short and sweet here.

The recent hype about Skype, and in particular surrounding the Verizon deal has been blown WAY out of proportion, IMHO. It’s time to set perspective here.

First, Skype was supposed to have killed off traditional telecom by now. Last I checked, that hasn’t happened (still a trillion dollar business).  In fact, Skype actually PAYS traditional telecoms a significant amount per month, thus helping them stay in business.

Second, Skype was supposed to revolutionize everything. Ok, they’ve done some cool stuff, especially if you like video.  And they introduced the world to HD Voice.  On the other hand, if you look at where Skype gets revenue, oh gee, it’s from traditional telecoms services – like phone calls, and phone numbers, and voicemail!  Where is the new and revolutionary business model? At the end of the day, Skype is not all that different than other Chat applications with Voice and video.

Third, lets not forget that Skype still is a black eye for E-bay and (now candidate for Governor of California) Meg Whitman. Meg paid (at least) $3 billion US in 2005, then wrote off $900 million. And of course now E-bay sold 65% of Skype to a PE group at a valuation of roughly $3 billion. That’s zero percent growth in valuation over 5 years. Not quite the wonderful story it’s perceived to be.  What’s more, not only did it not appreciate in value, but Skype added no strategic benefit for Ebay either – it was simply a distraction- a bad deal all around.

So before we go rewriting history, and (once again) claiming how Skype will tear down the telecoms world, maybe a little grounding in fact is in order.

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PhoneGnome participatory marketing challenge

It’s been over 4 years since PhoneGnome’s initial release.  It has evolved a great deal over that time and I’ve learned a lot.

Over on the PhoneGnome blog, we look at where it is, and where to go from here:

http://www.phonegnome.com/blog/2009/12/02/phonegnome-participatory-marketing-challenge/

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Don’t pay to pitch – no way

In response to Jason Calacanis’ recent post Why startups shouldn’t have to pay to pitch angel investors and the ensuing debate, short answer: Don’t do it. Don’t pay. Such angel outfits are scams, IMHO.

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Verizon CEO exiting one dying business for another

The NY Times reports that Verizon CEO Ivan Seidenberg has finally accepted that his landline business is going to keep sliding:

Mr. Seidenberg said that his “thinking has matured” and that trying to predict when the company would stop losing voice landlines “is like the dog chasing the bus.”

This is being touted as the most progressive thing anyone has ever heard (which might be true, coming from a telecom exec), but the irony is this:

“Video is going to be the core product in the fixed-line business,” Mr. Seidenberg declared. And the focus will move from selling bundles of video and landline to video and cellphones, he added.

That’s freaking hilarious. Verizon thinks video will replace all their landline revenue losses. They are jumping into Video just as it is approaching its end of life, or the beginning of the end anyway. People are starting to “cut their video cord” just as they began cutting their landline cord a few years ago.

My son’s dorm room at college includes a landline phone, Internet, and a cable TV connection. They actually have a phone plugged into the landline (probably mostly to talk to the school’s internal numbers, like the I.T. dept to keep the Internet working). They do not have a TV and don’t have anything connected to the CATV wall jack – and they don’t seem to miss it much.

Over the years to come, there will be as many people dropping Verizon’s video service as there are people dropping landlines today.  So this seemingly “progressive” view is sort of like saying we’re finally abandoning Betamax and embracing HD DVD!

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Vonage World versus Skype Unlimited World

Below is a run down of what’s different between the Skype “Unlimited World” plan compared to the new “Vonage World” plan.

This table only lists the countries where there are differences between the plans (specifically, where the Skype plan lacks coverage, since there are no countries included in the Skype plan that are not also included in the Vonage plan). For instance, the “Vonage World” plan includes landlines and mobiles in Puerto Rico whereas the Skype “Unlimited World” plan only includes landlines in Puerto Rico. Likewise, the Vonage plan supposedly includes all landlines in Mexico, while the Skype plan includes only landlines in Mexico City, Guadalajara and Monterrey.

Both plans include the following countries with (apparently) equal coverage: Argentina, Australia, Austria, Belgium, Bulgaria, Canada*, Chile, China*, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong*, Hungary, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore*, Slovakia, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand*, United Kingdom, United States*

Both plans have hidden limits. For the Vonage plan, the limit is 5,000 minutes per month (section 5.4 of the TOS http://www.vonage.com/tos/index.php). For Skype,  the limits on this so-called “unlimited” plan are “10,000 minutes per user per month, with a maximum of 6 hours per day. Also, no more than 50 different numbers in total can be called per day” (see http://www.skype.com/legal/terms/fair_usage/).

The Vonage World plan is $24.95/mo while the Skype plan is $12.95/mo. They are apples and oranges to a degree, as the Vonage service includes a phone number and hardware box and is used with a regular phone (no need to leave your computer on all the time to receive calls and no need to use your computer to place calls). The Skype service requires that you place calls using your computer and it does not include a number for receiving calls. Vonage is meant to replace a standard landline and work with a regular telephone while Skype is just for use on your computer. But that’s not the topic of this post, which simply compares the countries included in the two plans for outbound calling.

If you’re calling the countries listed above, you probably know how much those countries cost to know whether this plan would benefit you. I would guess that India and Mexico would be the big draws, as there are few flat-rate plans offered to these countries and per-minute rates are significant.

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Oh yeah, Vonage – forgot about them

Vonage recently expanded its $24.99 plan (approx. $33/mo. with fees) to include unlimited calling to landlines in 60 countries, including India and Mexico (subject to normal residential use restrictions).

The news of this reminded me that Vonage was still in business. I’ pretty sure I bet that they would be out of cash by now – so it looks like I lost that bet.  It wouldn’t be the first time (and it won’t be last, I’m sure).

So how are they doing? In February of this year, the NYSE gave Vonage a “Notice of Delisting”. Prior to this “Vonage World” announcement the stock was hovering around $0.40 per share. After the announcement, the stock hit a new 52-week high at $2.63. Since then, it has fallen back a little, but it’s still trading today at $1.35.  I guess investors like this new plan.

However, to me, the metrics don’t look all that great, so I don’t know what this rally is based on. In their recent 10-Q filing, Vonage reported customer acquisition costs of $363.01 per new subscriber for the second quarter of 2009, while it was $282.89 for the same quarter a year ago. Vonage lost 88,643 customers in the quarter, compared to adding 2,080 customers a year ago in the same quarter. On the plus side, ARPU and churn are holding steady.

Vonage still has an ugly balance sheet with only $56 million in cash and $203 million in debt.

The 10-Q reads:

We are facing increasing competition from other companies that offer multiple services such as cable television, video services, voice and broadband Internet service. These competitors are offering VoIP or other voice services as part of a bundle.

And goes on to say:

In addition, we believe several of these competitors are working to develop new integrated offerings that we cannot provide and that could make their services more attractive to customers. For example, as wireless providers offer more minutes at lower prices and companion landline alternative services, their services have become more attractive to households as a replacement for wireline service.

The new “Vonage World” plan is clearly an attempt to lower customer acquisition costs and reduce churn. However, it will increase costs and lower gross margin too. It’s competitive offer and I bet they will sign up a lot of customers (lot of India ex-pats, for example) – but with the lower margins will it work? The trends still don’t look good to me, but VoIP appears somewhat hot again, so maybe they will last long enough to (finally) be acquired.

UPDATE: country-by-country calling area comparison between Vonage World and Skype Unlimitied World plans.

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