Conundrum. ‘A paradoxical, insoluble, or difficult problem; a dilemma’. It was announced last week that Twitter had attracted a further $100m of investment seeing its valuation rise to more than $1B – and all whilst employing 75 people and with hardly any revenue generation (apart from a brilliant plan of selling more equity and JV funding). Having spent 20 years working in media and agencies, selling and buying ideas, campaigns and future plans – this poses me a conundrum. Every media and marketing professional I know understands value, profitability, ROI – as well as brand, innovation and first mover advantage. An ad campaign is not great because it gets fans and plaudits – its great when it achieves marketing results that the advertiser wanted. A media platform is not fabulous when it gets free readers and users – its fabulous when it attracts advertisers or subscribers to help pay for the media platform. As Picasso said ‘ the greatest compliment anyone can make me is to pay me for my work’.
So the conundrum is – if Twitter has lots of fans but a very small accounts receivable team – how can it be valued at $1B? And does its value only grow because more investors come on board .. hoping to sell, err, to more investors? Does this sound like the internet in 1999 not 2009? It leads to an interesting question. Is Twitter the next Google – or another Second Life or Friends Reunited? Remember they? In May a social media researcher, Rohit Bhargava of Sysomos, announced some very interesting factoids. Over half of all Twitter accounts are inactive (have not posted an update in over a week) – and the now popular dinner table note that top 5% of all Twitter accounts by volume of updates are responsible for 75% of the updates published on the site. Suggesting a lot of people dabble and drop out and those that remain are posting a ridiculous amount. In August Pear Analytics reported that 40% of all Tweets are ‘pointless babble’ and a further 37% are ‘conversational updates’. Nielsen reckons 40% drop out each month. I know a few people in retention marketing and they seem to call full blown 8.00 am marketing crisis meetings if their retention rate goes below 70% – and they are in highly cash rich and profitable businesses – not a startup trying to claim massive growth and loyalty (with no revenues). Ah, but social media is different maybe? Old rules do not apply and all that? So is Twitter a waking media giant or just advanced SMS to a load of casual contacts? As a Twitter user and soft fan myself, I’ve loved being able to get relevant posts from interesting folk and even seeing my cat get 38 followers. Yes its a bit of a lark. I’ve also seen a worrying trend throughout summer for a growing number of dodgy spammers, crassless marketing and poor sales offers too. I like Twitter and I think at the right time it could be a neat way to engage with fans of an event, band, a highly engaged political opinion and yes, some, repeat some brands. Do I want to follow my gas company or bank on Twitter? Will I be keen as mustard to get an update from my razor manufacturer on the 9-blade revolution? Err. No. I see it as another click on my phone or home pc – and a sometimes interesting 30′” distraction from some really useful stuff on the web that seriously engages me. Some sites have such brilliant utility that engage me and I pay attention. Google, Yell, Expedia, Brand Republic, Parkers, BBC, Amazon, Wikipedia, Multimap, National Rail, TFL, The AA. Others have fantastic new functionality and a cunning way to make money – Spotify. Already making money with simplicity and part owned by the record labels means it will get more and more creative industry support. Interestingly, Google in May 2007 said that You Tube would make money soon. Interestingly, Google in July 2009 says that You Tube will soon make money. And ultimately, You Tube should. Shouldn’t it? Unless media creators and rights owners decide to do what has happened with Spotify and set up their own channels to distribute their work for free – but on their terms, not someone elses. Maybe Twitter is simply a smart piece of social media functionality that will eventually be built into platforms and so the hope is that some giant like Google, Microsoft or Apple will buy it to be part of their bundle. But worth $1B? Will it grow, or will its users grow out of it? I’m not so sure. It’s a paradox. It’s a conundrum. I’m off to logon to Skype, hop along to Second Life where I hope to find some of my pals from Friends Reunited – maybe they can help.