The Social

This one's a surprise. Twitter will have turned a profit in 2009, a BusinessWeek report claims, citing sources. What happened? Search deals with Google and Microsoft brought in a nice chunk of cash for the company, which has raised well over $100 million in venture capital and has a paper valuation floating somewhere around $1 billion.

Considering the company has not yet put forth a long-term revenue strategy, this would be one of those Christmas miracles along the lines of a neurotic mom getting home to her stranded 8-year-old by fortuitously hitching a ride with a polka band fronted by John Candy.

So let's look at the details. Sources told BusinessWeek's Spencer Ante that Twitter's search deals with Google and Microsoft's Bing brought in $15 million and $10 million respectively, and that Twitter has managed to cut some of the high costs related to text-message functionality. (These costs were so exorbitant that Twitter temporarily had to restrict some international SMS codes.) OK, cool. Those numbers are decently plausible, and Twitter's strategic hire of a mobile business-development dude early this year likely had something to do with it. And Ante's article makes it clear that while sources have told him that Twitter will end 2009 on a profitable note, that doesn't mean it's going to be profitable next year.

But there's a difference between being cash-flow positive and being profitable, and it's also not totally clear as to what Twitter's other expenses are, or what they will be next year.

Ante writes:

Now that Twitter has become so popular, it has gained bargaining power with telecom companies and has managed to renegotiate so many deals with carriers that the company pays far less for the services. "Those used to be the biggest line item," says one source. "Generally speaking, those costs have gone away. Now people are the biggest line item."

People. Yes. Like the new office space they just moved into, and their still-expanding payroll, and stuff like that. Also: hardware, and other forms of defensive weaponry against evil whale attacks. The company also sometimes buys stuff, and continues to develop new features--like the current test of "contributors" accounts that it may end up charging for. So even with costs cut via a savvier mobile strategy, there are plenty of other costs that could be escalating simultaneously.

What's good news for Twitter is that getting $25 million out of search deals (if that's indeed true) shows that the company could expand that into a stronger long-term revenue strategy. Critics have been lukewarm on the possibility of Twitter attempting to support itself with advertisements or paid accounts, and nobody's really gone into depth on the question of whether the businesses currently raving about Twitter's power of "conversation" will cough up for more in-depth analytics.

Maybe they read the Yelp review that says Google's headquarters is infested with skunks and raccoons.

Just a few days after reporting that Google was about 80 percent likely to be acquiring business reviews site Yelp for a totally sweet $500 million, TechCrunch has backtracked. Late Sunday, TechCrunch reported that Yelp CEO Jeremy Stoppelman personally walked away from the deal and that company representatives informed Google over the weekend they aren't selling.

Or it might have been the skunks.

(Credit: CC Out at Bob's/Flickr)

That's odd. People seemed to think it was generally a good deal. TechCrunch isn't exactly sure what went wrong but speculates that Yelp may have gotten a better offer for a potential acquisition or strategic partnership that caused it to bail.

What could also have something to do with it: Google does a lot of things very, very well, but one thing it's never nailed is community. (Knol most certainly didn't kill Wikipedia, Orkut was big in Brazil but then faded in the wake of Facebook's growth, and YouTube's commenters seem to come from a very special place somewhere between the sixth and seventh circles of hell.) That's evident from looking at what Yelpers had to say about the potential deal last week. Proudly opinionated and devoted to the Yelp brand, many Yelpers were concerned that a Google buyout would degrade the site's sense of community--something that could, effectively, kill it.

Perhaps Yelp's execs thought the same and figured that strategic partnerships might be a better route for now.

If Google's rumored $500m acquisition of Yelp goes through, the search giant may finally get a solid lock on the "hyperlocal" Web. But it'll also be acquiring a big community site--and those are notoriously hard to wrangle.

Restaurant industry blog Eater might have put it best: "One can only assume that with Google's muscle behind the site, the millions of users who log on to complain about restaurants would be able to say stupid stuff faster, and with more efficiency," editor Amanda Kludt wrote on Friday.

All snark aside, it's the same sort of issue that arose a few years ago amid persistent rumors that Google was going to acquire Digg, another site reliant on heavy participation from a loyal and extremely vocal community. The questions are more or less similar: What would Google change, and how much would they change it? Does Google's massive scope make it untrustworthy?

Yelp's official word: "Yelp is approached frequently by numerous entities to discuss partnerships, investments and more, and the company does not comment on private discussions that may occur."

Truth be told, the state of Yelp's forums on Friday indicated that many were more interested in talking about "Why are NYC apartment brokers such d-bags?" and "The official 'Jersey Shore' on MTV thread" than about whether Yelp might get sucked up by the Google monster. But a few threads did emerge, and the gist seems to be pretty much the same: They better not change too much. And please keep throwing parties.

"I wonder how this will effect Elite parties as well as Yelp Talk?" one Yelper asked in a Bay Area-centric thread about the acquisition. Another said, "So long as it's not Rupert Murdoch buying it." Some Yelpers were optimistic, suggesting that maybe there would be better integration with Google maps or additional technical improvements.

But others were concerned about quality control. "It means more trolls and fake reviews," one Yelper griped.

"Anyone ever look at the comments on YouTube videos?" another asked. "That is what is gonna happen here."

There were a few threats of account deletion, like "If this happens, I'm deleting my profile" and "Yelp is big because of us. Let's demand money or delete our accounts en masse." Generally, those aren't any real indicator of community revolt, but they're a reminder that it's extremely possible for a big buyer of a community site to mess things up big-time. LiveJournal users weren't thrilled about its Six Apart ownership, which ultimately failed. Likewise, when News Corp. acquired social network MySpace, mismanagement and a lack of innovation were likely what led to a drop in traffic and the eventual dominance of Facebook.

Worth a read: Yelpers' reviews of Google HQ in Mountain View, Calif. Choice bits range from "Google has lots of yummy, organic snacks and drinks" to "They have way too many skunks after 7 p.m. nightly and raccoons living on the Google campus."

This post was updated at 10:48 a.m. PT with comment from Yelp.

What Twitter's homepage looked like before it went down on Thursday night.

(Credit: CC u07ch/Flickr)

Twitter stumbled again overnight on Thursday. But this time, it wasn't the work of the "fail whale," the cuddly cartoon personification of the site's excessive technical baggage. Rather, the site was replaced with a foreboding message from "Iranian Cyber Army" before crashing entirely, indicating that it had been the victim of a malicious attack that targeted its internal servers.

Co-founder Biz Stone posted a brief clarification on the issue late on Thursday night. "Twitter's DNS records were temporarily compromised tonight but have now been fixed," he explained. "As some noticed, Twitter.com was redirected for a while but API and platform applications were working. We will update with more information and details once we've investigated more fully."

At the risk of sounding like an evening-news anchor calling attention to exactly how dangerous your treadmill is or how many diseases you can get from the ball pit at Chuck E. Cheese, I think it's time to explore the question: Is it safe to use Twitter?

For one, Twitter's track record with security has been shaky at best. A security flaw this spring exposed the data of a number of employees and allowed a hacker to pilfer some internal documents. Several high-profile accounts, like those of Britney Spears, Ashton Kutcher, and CNN anchor Rick Sanchez, have been targeted individually. Twitter has been the victim of phishing attacks. Other hackers have proved that Twitter accounts can be set up specifically to corral botnets of infected PCs. And in perhaps the biggest incident of all, a politically motivated denial-of-service attack in August that targeted multiple social-media sites managed to cripple Twitter entirely.

Think of it this way: if Facebook, a far bigger and more mainstream site that's had concerns about user privacy splashed all over the news recently, saw its homepage replaced with a nefarious political message, there would probably be a fresh round of calls for CEO Mark Zuckerberg's resignation. Twitter's heavy users are, for better or for worse, accustomed to sporadic downtime and glitches. They're also less likely to ever visit the Twitter.com homepage, considering the service has so many points of entry--text message, as well as third-party apps for mobile, Web, and desktop. Users have become accustomed to logging into third-party applications with their Twitter credentials.

That, perhaps, makes the overnight hack a bigger concern. Even though it's unlikely that user accounts were compromised in this DNS redirect, it's yet another sign that Twitter's security operations have time and again proven weak enough that the service doesn't exactly seem watertight.

A political message, or just plain obnoxious?
On the other hand, we still don't know much about this attack and it may have been less sophisticated than some may fear. One, nobody's exactly sure yet who the hackers were. "Of course, just because a message saying 'This site has been hacked by Iranian Cyber Army' has been posted on a Web page does not necessarily mean that hackers from Iran are responsible for the defacement," Sophos security consultant Graham Cluley wrote on his blog Friday.

Additionally, Cluley said, the aim seems to have been to either get a political message through or to simply be obnoxious. "Fortunately there is no indication at this point that the page was carrying malicious code, and this attack appears to have had political motivations rather than being designed to steal confidential information from users," he wrote.

"It really looks like it was people were redirected to a 'hactivism' site," weighed in fellow Sophos analyst Beth Jones via e-mail. "There was no malicious code on the site claiming to be the 'Iranian Cyber Army' either. It looks like they just hacked the registrar to redirect traffic. So it's quite probable that none of Twitter's own servers were touched."

Another reassurance is the fact that Twitter simply doesn't have the kind of sensitive data that a Facebook or Google does. While it does have millions of mobile phone numbers stored to power its text-message app, not to mention archived private "direct messages" between users, Twitter does not index a whole lot more that isn't otherwise public. Facebook, for example, has many members' credit card numbers on hand (if they've ever used its "gift shop" feature), not to mention extensive personal data in profiles like addresses, birthdays, and family connections. Members who are still concerned about the security of their Twitter accounts can take the obvious step of changing their Twitter passwords to something that they don't use on their e-mail, Facebook accounts, or elsewhere--just in case.

Beth Jones says she has confidence in Twitter. "I wouldn't say their security is second-rate by any means," Jones said via e-mail. "As it stands, they weren't actually compromised, but I can see from a user point of view the questions and concerns. At Sophos we see a new site compromised every 3.6 seconds. That's easily close to 24,000 sites a day, and of those, the vast majority are legitimate sites that get hacked."

That doesn't mean that Twitter shouldn't start making it more clear that it takes security seriously. If the company, which is now beta-testing a "Contributors" feature that may pave the way to paid corporate accounts, begins storing financial information, we can only hope that their security operations are turned up a few notches. Or, ideally, an order of magnitude.

This post was expanded at 6:23 a.m. PT with comment from Sophos' Beth Jones.

(Credit: Caroline McCarthy/CNET)

This year for Christmas, I finally decided to give my family something that they've been asking me about for more or less the past five years: I told them that I would clean my room.

No, really. I moved out of my childhood home years ago, but more or less shut the door to my room and didn't change a thing. It's sort of a late '90s-early '00s teenage time capsule. There was stuff in there that had not been touched since the Clinton administration. There were magazines with Justin Timberlake on the cover from an era when nobody expected he'd be cast as a Silicon Valley hotshot in a movie directed by the "Fight Club" guy. There were varsity letters and prom photos and model rockets and Warped Tour '01 memorabilia and pretty much whatever else you'd expect to find in the living space of a kid who came of age in the era of "Can't Hardly Wait" and "Dawson's Creek."

That inventory included one almost perfectly preserved AOL 7.0 installer disc, a CD-ROM that boasts "Faster Than Ever!" and offers 1,025 free hours of access or 45 days, whichever comes first, with no credit card required. (1,025 hours is slightly under 42 days.) On the red-and-gold packaging is the face of a Japanese anime-style character, the edges of the drawing blurred to make the marketing message absolutely clear: This is fast. This is the future.

NEW YORK--The line on Wednesday night snaked outside the New York Stock Exchange building as a swarm of marketing, advertising, and other media types waited to get into the party that AOL was throwing on the trading floor to mark its spin-off from Time Warner. Onlookers weren't really sure what the big deal was.

An evening commuter walked past, craning his neck up at the massive AOL-logo banner--yes, the one with the fuzzy blue monster on it--and asking a few of the people in line, "Why's AOL having a party?"

"Spinning off from Time Warner."

"Oh, finally," the commuter replied, and sauntered off into the night.

Approximately 10 minutes later, security stalled a pack of party guests between the coat check and the entrance to the trading floor so that they wouldn't get in the way of AOL CEO Tim Armstrong's photo op on the red carpet with publishing industry dame Anna Wintour. There were waitresses carrying massive bourbon-infused cocktails called "The Ticker," sushi chefs chopping up spicy salmon rolls, and a photographer snapping pictures of guests posing with the iconic NYSE gavel. Oh, and there was a DJ booth where rap legend Sean "Diddy" Combs was calling the shots.

The next morning, long after that had all been cleared out, trading of the new AOL stock commenced: it fell in the first hour, hovered around $23 for most of the day, and climbing a few notches to close at $23.52. It looked less like the refreshed, shiny AOL that had turned the NYSE trading floor into a celebration of its vision of 21st-century publishing, and more like the AOL that, in preparation for the spin-off, cut 2,500 employees and began to explore selling off peripheral businesses like ICQ and MapQuest.

"I haven't looked at it because we've been so busy," Armstrong, in a morning call with reporters and analysts, said of the company's stock price. "The stock may go up and down, but I can tell you internally that the company continues to progress and get stronger."

Not very long ago, AOL was a punchline: edgy publishing outlet Thrillist, known for its in-the-know men's newsletter and wacky stunts that often involve party planes, threw a party in the summer of 2008 with a "vintage AOL" theme that interspersed the once-ubiquitous dial-up tone with mid-'90s pop songs (Thrillist CEO Ben Lerer, it should be said, happens to be the son of former AOL exec Ken Lerer). AOL was the ultimate brand for the old Internet, the one that would forever be associated with the "You've Got Mail" recording and the e-mail addresses that have long since fallen out of favor.

Its attempted revamp does elicit a few "over the hill" snickers, but in New York's media community--the people flooding the Stock Exchange on Wednesday night--it's treated with a good deal of respect. Armstrong was very well-regarded in his prior gig as a sales executive at Google. At the lavish AOL spin-off party, there were fewer snarky remarks than expected about wasted money, premature celebration, the disastrous results of AOL's original Time Warner merger in 2000, or how many laid-off employees the event had cost.

Because these are the people who, as much as New York media likes to thrive on an aura of cynicism, really do want the new AOL to succeed. The industry's been more or less smashed to bits, with magazines closing up shop and newspapers going through yet another fit of layoff rounds. Regardless of early concerns about its stock price, the new AOL is a bright spot.

Using its 2005 purchase of blog network Weblogs Inc. as a cornerstone and ambitiously rolling out new properties to add to the arsenal, AOL increasingly shifted focus away from its access business and more toward publishing. The company uprooted its corporate headquarters from Dulles, Va., to New York, picking a downtown office space in much closer proximity to the trendy digital agencies and blog networks of SoHo and Cooper Square than to the media industry stalwarts--including then-parent company Time Warner--in midtown.

Shortly before the spin-off, AOL announced a project that Armstrong had been hinting at for some time: Seed.com, a sort of clearinghouse for assigning freelance journalists and photographers to areas that its "engine" has deemed to be high-interest or in need of coverage. The company hired veteran journalist Saul Hansell to helm the project.

"Basically, our system allows us to take lots of data to figure out how to make better content for the Internet," Armstrong said in Thursday's conference call.

Seed.com has garnered some criticism: that it's really no different from existing business models of companies like Demand Media; that it will invariably prioritize tabloid-like, sensationalist stories with huge readership potential rather than less titillating but important journalistic endeavors; or that regardless of how innovative it is, it won't save AOL's advertising revenues.

Armstrong, of course, has a "go forth" attitude toward it all. "We focused the strategy of the company very clearly and succinctly around content, advertising, and communication," he said in Thursday's call. "And as we think about the future and stay focused on what we're going to be executing, we're in a good place because of where the Internet is headed. The '90s were about access, (and) AOL played a major role in access...This decade has really been about platforms: Google, Facebook, Twitter, etc., and we believe that the next decade will really be about content.

Not everybody agrees. But the invite list for AOL's celebration sure hopes Armstrong has the right idea.

The new AOL.com.

As promised, AOL turned on its redesigned homepage Thursday in conjunction with CEO Tim Armstrong's ceremonial ringing of the New York Stock Exchange opening bell. The company formally spun off from parent company Time Warner this week and is now traded publicly, and to commemorate the media-centric rebirth, it enlisted branding agency Wolff Olins to give it a spiffy new look.

Wolff Olins describes the rebranding as "deliberately disruptive and deliberately unlike what is being done by other online media businesses...designed for an environment where media is no longer broadcast, but rather is discovered through fragmented, non-linear conversations." Deep.

'Will you be my friend?'

(Credit: AOL)

Well, the new AOL.com looks pretty much the same as the old AOL.com, except that in addition to the new logo, I'm given the option to navigate through "themes" featuring various drawings and photos. Conveniently, the color scheme of the page changes to match the selected image. By default, I was offered an adorable smiling blue monster peeking out at me from behind all that shiny content that AOL believes will save not only its brand, but the entire beleaguered media industry.

The same fuzzy monster image was hanging on a massive banner outside the New York Stock Exchange on Wednesday night, when AOL invited employees, advertising and marketing types, and the occasional celebrity (OMG! P. Diddy was there!) to a glitzy party on the trading floor (in which a significant amount of financial-industry machinery was likely in grave danger of being damaged by splashes from liberally mixed cocktails or rogue bits of sushi rice).

Really important question: What is the monster's name? I'm sure someone internal at AOL or Wolff Olins has come up with a nice nickname for the happy little fellow. Or perhaps this is a matter of major corporate dissent within the new AOL--it's not like we didn't know they'd have some big challenges right out of the gate.

Could the geolocation wars be the next browser wars? Maybe. There's a fresh $8.4 million in venture funding for Gowalla, a game-like mobile app that lets you "check in" to locations around the world, see where your friends are, and swap virtual goods along the way.

The Series B funding round, announced Wednesday, is led by Greylock Partners with contributions from Shasta Ventures, Maples Investments, previous investors Alsop-Louie Partners and Founders Fund, and individual investors Ron Conway, Kevin Rose, Gary Vaynerchuk, Shervin Pishevar, Jason Calacanis, and Chris Sacca.

Interestingly, at least two of Gowalla's individual investors--Conway and Rose--are also investors in Foursquare, another game-like "geo" app that lets you find your friends and collect "badges." And at least four of them--Conway, Rose, Sacca, and Vaynerchuk--have additionally backed location software company SimpleGeo, whose funding CNET first reported late last month.

This either means that there are some well-moneyed people in Silicon Valley who throw greenbacks around blindfolded, or that some prominent folks think there's room for more than one "geo" app out there.

Regardless of where the investment money goes, it's clear that geolocation is, after many tries and missteps, finally one of the hottest spots on the Web. Early players like Loopt and Brightkite are still around and kicking, but Foursquare and Gowalla's game-like interfaces have proven more press-friendly these days--not to mention more addictive among hardcore users.

Gowalla, available as an app on the iPhone and Android, was founded in 2007 but formally launched ten weeks ago (its iPhone app has been around since last spring). The company says it now has 50,000 users in 92 countries and logs 20,000 "check-ins" every day.

Foursquare, which launched at the South by Southwest Interactive Festival in March and which is rolling out its launch in packs of cities, says it has 146,000 registered users who have logged 3.4 million check-ins.

This post was updated at 10:47 a.m. PT with data from Foursquare.

An orangutan in the Vienna Zoo takes pictures that are uploaded to Facebook. No, she didn't take the self-portrait.

(Credit: Nonja's Facebook page)

She's like the Ashton Kutcher of the ape world: an orangutan in the Vienna Zoo now has a Facebook fan page to showcase the photos she takes with a digital camera. The orangutan, named Nonja, uses a Samsung ST 1000 point-and-shoot that automatically uploads the photos.

When this post was published, Nonja had over 9,000 "fans" subscribed to her page.

But there's a catch: coverage of the camera-toting ape in the U.K.'s Daily Mail explains that the camera has been modified to dispense a raisin whenever the shutter button is pushed. So Nonja is evidently more interested in tasty treats than in artistic endeavors.

The non-orangutan version of the Samsung ST 1000 was released this summer (though not in the U.S.) and is equipped with Wi-Fi, Bluetooth, and GPS.