The case for Twitter’s independence (unless Google or management buys)

This was posted on 7 October 2016 at TechCrunch
Original Here

Keith Teare
CRUNCH NETWORK CONTRIBUTOR

Keith Teare is the co-founder of TechCrunch and today runs Palo Alto incubator Archimedes Labs.

The problems associated with the widespread rumors of Twitters “for sale” status and that the management team is divided on whether or not to sell the company were compounded this morning with reports that Google, Disney and Apple will not be bidders. The stock price is down 20% to $19.79 at the time of writing.

Who runs Twitter — Board or Management?

The impressive Board of Directors seems to have set itself against CEO Jack Dorsey by seeking an exit. This is not the first time the company seems to be being run by the Board rather than the management. Previous changes in strategy, management and even the decision to IPO do not seem to have been organic decisions planned by management but rather reactive Board led decisions.

As anybody who has run a business knows, a Board-Management tug-of-war almost never results in a win. Boards hold managers accountable on behalf of shareholders, and managers run companies. It is not clear that this is the case at Twitter and that may be the source of many of the issues.

The Board is made up of many celebrity figures including Peter Fenton, Marjorie Scardino, Bret Taylor, David Rosenblatt, Martha Lane Fox and Omid Kordestani. Previously Fred Wilson had also been a strong minded Board member. The Board’s opinions about the strategy and tactics may reflect a weak management needing direction, or may represent frustrated operators hoping for an exit and seeking to influence day-to-day decisions. Only an insider knows. But one thing is clear, unless Twitter management actually runs the company, the future of the company will be bleak.

The case for “No”

Why no? In principle, Twitter is the communications bus for the entire world. I would guess that 2–3 billion people a month see a Tweet mentioned on TV, radio, in a movie, in print. It has become an almost ubiquitous broadcast platform for anybody wishing to publish an event, an opinion, a riposte. It is a marketing platform used by every brand in the world. Compared to the other means of disseminating content, Twitter is a giant.

In its earliest manifestation, Twitter understood its position as a message dissemination infrastructure. It was happy for third parties to “carry” its messages to consumers and businesses via software integrations with its APIs. The potential reach of a Tweet was the addition of people who went to twitter.com, as well as people who used a piece of software provided by a third party to disseminate tweets.

Others were allowed to index tweets and provide filtered views showing tweets that pertained to a topic or an interest. It was an open and widely distributed platform, somewhat like the internet itself. Search engines could index and point to it just as they do web pages.

The biggest version of Twitter one could imagine?

This stage of Twitter’s development evoked its true potential, and was the manifestation of the biggest version of Twitter one could imagine. A universal data bus for everything important now. With an index and search open to developers.

The business model for this stage was obvious. An ad every n tweets no matter which environment the Tweet stream was consumed through, with Twitter as the “AdSense” and “AdWords” of the whole thing. This would have resulted in Google-sized revenues quickly.

The smallest version of Twitter one could imagine?

But at that time, there was a belief that Twitter needed to become a destination. This implied that any ability for a third party to take tweets and re-broadcast them through another app or site was bad. It implied that indexing and searching tweets was to be blocked, it set Twitter against its disseminators. By doing so, it limited the Twitter audience to those who directly engaged with the properties owned and operated by the company.

This was the smallest version of Twitter one could imagine. It seems clear that many at the board level wanted Twitter to be a destination, a Yahoo if you will. And to create content “channels” that would attract the audience for the channel. And to prevent any other means of accessing those channels.

This allowed Twitter to become a branded destination and created the conditions where its key KPIs were not “tweets seen” but became “logged-in users” on a Twitter-owned property. The advertising platform Twitter has so impressively built over the past 3–4 years is based on top of this approach.

The $2 billion or so in revenues it generates is impressive, but tiny compared to what would result from a truly universal data bus available everywhere. This would be a replacement of Google for content discovery, whereas the current Twitter is at best a replacement for Yahoo as a destination for content — and a poor one at that.

IPO was premature?

Twitter’s IPO was done before the company had truly completed its transition to becoming a content-rich destination site. The suspicion is that the need to IPO early was driven by board decisions and not organic management choice.

Dick Costolo did an excellent job of trying to manage a ship in a storm that had only partial navigation, but the stock price ultimately reflected two things. Firstly, a company that could not accurately predict revenues and, secondly, one that had a KPI (logged-in users) that was always going to be its worst metric. The market took the direction of the board and management that Twitter wanted to be a branded portal business with advertising and measured it accordingly.

Most of the 2013–2016 ailments of Twitter emanate from this product decision and the decision to IPO before it was completely built and functioning. The management changes, the stock performance, the yearning to sell the company.

The case for “Yes”

Twitter is a dysfunctional company with an interfering board and, like any dysfunctional family, it needs a divorce. A buyer would gain a clean slate and would be able to build the biggest possible version of Twitter, free of internal squabbles.

This is the strongest case for a sale. But who should be the buyer if this outcome is wanted? There are only two good answers. One is Google, the other is a private equity buy-out.

Google is the obvious buyer. A universal data bus carrying everything that is important now to the entire world, with ads every n Tweets would probably have revenues close to and eventually surpassing web-search revenues.

With the emergence of live video — an area YouTube should excel in — the impact of this would be compounded by the video ad opportunity. And the vision would be well-aligned with Google’s “organize the World’s Information, and make it Accessible” vision. If Google is truly out of the race, Larry or Sergey or David Drummond — call me and let me explain why you should re-consider. I’m always available at http://chat.center/keith.

Twitter is a dysfunctional company with an interfering board and, like any dysfunctional family, it needs a divorce.

If Google really is out of the running, the next best sale is to PE. Silverlake, KKR or Blackrock should look at how they worked with Skype previously and consider taking Twitter private, removing the short-term thinking and re-launch it as the biggest version of Twitter it can be. That company could own digital advertising and audience engagement for decades to come.

If neither option materializes, Twitter should take itself private — Qihoo360 just did this, as did Dell. There would be no shortage of banks interested in helping.

What’s next for Twitter?

The board should not sell Twitter to a media or content buyer. By doing so they would cheat the world by taking away a wonderful chance to build a universal data and messaging bus able to scale to the challenges of 4 billion smartphone owners wanting news, entertainment, live video and more.

Management should go back to Twitter’s founding principles and build that universal, open, biggest possible version of Twitter.

And the markets should give the company the space to perform such a transition.

Twitter is not Yahoo. It is a baby, struggling to grow up. Infanticide is wrong. Let the children grow.

After Chirp, is Twitter related investing still smart?

Robert Scoble cornered Ron Conway in the hallway at the Chirp conference yesterday and in the aftermath of Twitter acquiring Tweetie, and announcing their own URL shortening service, asked the big question. Is it still sensible to invest in companies seeking to expand or enhance the use of Twitter in some way?

Ron is unequivocal in his answer.

For what it’s worth I think Ron is right…. as usual 🙂

TechMeme Link here

In Defense of “nothing”

Columnist Henry Porter is generally considered to be a wise observer of the human condition. Today, in an article in the UK Guardian owned Sunday, The Observer, he blew it ….. badly. As a newspaper man he ought to have been aware of his almost certain bias and perhaps counted to ten before pushing “send”. And, given that he didn’t,  his editor should have saved him from himself after the fact, perhaps by asking “are you sure?” But then I would have nothing to say… and neither would others.

Mr Porter’s key contention is one that is being heard more and more from the seriously wounded media industry:

“Google is in the final analysis a parasite that creates nothing, merely offering little aggregation, lists and the ordering of information generated by people who have invested their capital, skill and time. On the back of the labour of others it makes vast advertising revenues – in the final quarter of last year its revenues were $5.7bn, and it currently sits on a cash pile of $8.6bn. Its monopolistic tendencies took an extra twist this weekend with rumours that it may buy the micro-blogging site Twitter and its plans – contested by academics – to scan a vast library of books that are out of print but still in copyright.”

Let’s take this apart:

“Google is … a parasite” – Well, clearly Google has a dependency on the existence of content…. it is, after all, a search engine. So, no content, no Google. But is this parasitic, or is Google more like a librarian… an essential organizer, making discovery of content within a vast mass of it, possible. Do I need to answer?

” Google ….creates nothing” – Nothing? What is the vast index and the algorithms that make the index produce search results. Is it nothing? Again… no answer required.

” Google is … merely offering little aggregation, lists and the ordering of information generated by people who have invested their capital, skill and time.” – “little aggregation”; “lists”; “ordering of information”. Mr Porter has clearly never attempted to crawl, index, and scale a search interface for hundreds of millions of people. He thinks it is trivial. Sadly it is not. And Google does it better than anybody else. How many of Mr Potters readers come via Google’s lists and ordering? Please tell us…. (hint, it is a lot).

“…On the back of the labour of others it makes vast advertising revenues” – This takes the biscuit. What work did any Mr Porter do to make his content discoverable by a vast and growing army of readers? The labour is all Googles. It places ads on top of its own canvas, the Google search engine. It also offers advertising to 3rd parties and according to its earnings reports, shares more than 75% back with the sites who use its advertising engine. The vast sums of advertising money flooding to the Internet are coming because of Google – because Google gave a way for an advertiser to spend its money effectively and measurably. Google makes advertising revenues for the entire ecosystem.

So.. what is Mr Porter really saying. Is it a cry for help? I don’t think so. He is way past help. Bitter, angry and lost in a new media world he finds unfamiliar.

At the root of it is the fact that the role of a media company, and its ability to serve its 3 audiences – readers, creators and advertisers, now rests almost entirely on technology. Specific technology at that… the ability to find, organize and understand data (content). Distribution and monetization are all about technology. Mr Porter’s employers – the Observer – (perhaps parasites on his writing, simply adding paper and print to his efforts) are not a contender to provide these services.

Google represents a company typical of the future of media. It brings technology to scale and serves consumers, creators and advertisers. If you want to be in the game, you need to grasp that content can not stand alone. It needs help to be discovered, distributed and monetized. Googles only fault is that it is better than anybody else at these tasks. Can it be bettered, absolutely! But not by clinging to the past. My advice – read Jeff Jarvis and his book What Would Google Do Mr Porter, you will learn a thing ot two.

Update:

Here is the TechCrunch take on the story.
Here is the updated techmeme discussion

RSS has peaked! – Forrester. Nope, it hasn’t! – Me

Forrester released a report today ($279 download if you want it). Titled “What’s holding RSS back?” it claims that only 11% of Internet consumers use RSS and that those who have not don’t understand it.

Steve Rubel at Micro Persuasion responds that :

“..while feed adoption may have crested the idea of online opt-in communications is just getting going. The Facebook newsfeed, Twitter and Friendfeed are perfect examples of opt-in vehichles that bring content you care about to you. In each case, you’re total in control. You can unsubscribe from individuals or groups and tailor the stream so that what you want finds you.”

Whilst Steve is right about the adoption of technologies like Twitter, Friendfeed and Facebook, that really misses the point about RSS.

RSS is simply a form of XML, designed for allowing applications to syndicate, and others to aggregate. It is not a “consumer application. It is an enabling technology for consumer applications.

Somebody who reads a classified ad on Oodle.com is doing so because, in the background, RSS is being used to get the Ad from its source, onto Oodle. If you read the same ad on one of Oodle’s network partners like Yell, it may have gotten there via an RSS feed. Similarly, a Techmeme article arrives, partly due to RSS.

In other words, RSS is widely adopted and makes possible a wide range of applications that rely on aggregation (inbound data) or syndication (outbound data). Is the movement of data around the network, by applications, using RSS, going to stall. I don’t think so. Are the number of consumers who see data on the web, data that is only there because of the existence of RSS, going to grow? Hell yes!

It feels like Forrester may have been asking the wrong question. Not, how many consumers want RSS? But, how many Internet users want applications that can save them browsing and discovery time by aggregating their preferred content into one or more places? The former may stall (although I doubt that is true) but the latter will certainly not.

Having said that, the report does have a point. Giving consumers places to read about their passions, drawing on the work of many, via aggregation, has to be a priority for Internet publishers. But just as high a priority is hiding the complexities that go along with today’s “blog readers” and simply giving people the content they want. No argument there.