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December 21, 2009 8:42 AM PST

Twitter? Profitable? Really?

by Caroline McCarthy
  • 15 comments

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.

Originally posted at The Social
December 21, 2009 6:24 AM PST

Yelp bails on Google deal?

by Caroline McCarthy
  • 11 comments

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.

Originally posted at The Social
December 18, 2009 10:34 AM PST

What would Yelpers think of a Google buyout?

by Caroline McCarthy
  • 5 comments

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.

Originally posted at The Social
December 18, 2009 5:56 AM PST

So, is it safe to tweet now?

by Caroline McCarthy
  • 15 comments

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.

Originally posted at The Social
December 9, 2009 8:37 AM PST

Geolocation wars heat up: Gowalla raises $8.4 million

by Caroline McCarthy
  • 4 comments

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.

Originally posted at The Social
November 30, 2009 2:03 PM PST

Hungry fail whale eats up Twitter lists

by Caroline McCarthy
  • 2 comments

Can't anybody tell that the fail whale is hungry?

(Credit: Flickr user Victoria Belanger)

Something has been rocking the boat over at Twitter, where stability issues on Monday afternoon caused the company to temporarily take down Twitter Lists, a popular and relatively new feature that lets members group Twitter accounts into categories.

"We began experiencing a very high rate of errors and we are working on the underlying problem," a post on the Twitter status blog read. It was later updated saying, "We are now recovering from this unexpected downtime. The Lists feature is temporarily unavailable as we diagnose the cause of the outage."

Many members had reported sightings of the "fail whale," Twitter's error message featuring a cartoon whale, earlier on Monday. It may have been more noticeable than usual because of the day's status as "Cyber Monday," a big day for holiday e-commerce deals--which in this day and age means plenty of people hunting on retailers' Twitter accounts for fire-sale promotions.

Obviously, amid all the seasonal shopaholism, somebody forgot to feed the whale.

Originally posted at The Social
November 20, 2009 8:00 AM PST

Brizzly opens up...and translates

by Caroline McCarthy
  • 2 comments

An example of Brizzly's new tweet translation.

(Credit: Brizzly)

Web-based Twitter client Brizzly made a dual announcement Friday: first, it's opened up into a full public beta mode (previously, an invite code was required); and second, it can now translate tweets into your default language on the site.

To translate a tweet in Brizzly--which already expands links, videos, and photos posted to Twitter, creating a more visual experience--you can click on a question mark for an instant translation. This is interesting, as Twitter has made its first moves recently in launching translated versions of the service (starting with Spanish), meaning that there will potentially be many more non-English tweets flowing through the system. It uses Google Translate, so needless to say, it's not totally perfect.

Brizzly added Facebook Connect support last month.

Originally posted at The Social
November 19, 2009 9:00 AM PST

More on mobile payment front: Boku steps it up

by Caroline McCarthy
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The simple concept of having virtual-good payments in games sent directly to your cell phone bill has gotten a lot of buzz--and stirred up a lot of rivalry. One of the start-ups looking to pull this off, Boku, announced Monday that it has signed on a dozen new gaming partners, both a few based on the Facebook platform and some others that are either Web-based or desktop downloads.

The partner companies are Waves, Cie Studios, Cyberstep, GameDuell, IGG, King.com, NHN USA, Ntreev, Outspark, PerfectWorld, Snap Interactive, and Zoosk. Most of them aren't household names: they're game manufacturers, not the games themselves, and some of them are most prominent outside the U.S.

There are a handful of companies trying to grab market share in this space, but the two who have been most vocal about making inroads have been Boku and rival Zong, which last month announced that it would allow members to sync credit cards with their phone numbers, allowing for larger payments and putting the company closer to direct competition with the likes of PayPal.

Boku says it's sticking to the mobile-number-only strategy, choosing instead to ink more deals and emphasize its global reach: with the current round of partnerships, the company says it will have 200 million registered users added to its ranks (no word on how active they all are, or how much redundancy there is across games).

Additionally, Boku has made some infrastructure upgrades that it says will improve the user experience, including the ability to detect whether a phone number that has been entered is landline or mobile--and if mobile, what carrier it's coming from.

Originally posted at The Social
November 16, 2009 10:05 AM PST

Oxford's word of the year? 'Unfriend'

by Caroline McCarthy
  • 31 comments

Perhaps in a sign of how the plague of social media has numbed us all to the value of legitimate human connections, the New Oxford American Dictionary has picked the verb "unfriend," or "to remove someone as a 'friend' on a social networking site such as Facebook," as its 2009 Word of the Year.

At the very least, it's a testament to the ubiquity of Facebook, which now has well over 300 million members around the world.

Facebook itself takes the process of "friending" and "unfriending" very seriously. It once sent warning notes to players of a third-party game called PackRat because it encouraged players to amass huge friends lists (good heavens! they're polluting the social graph!), banned a Burger King ad campaign that let members "sacrifice" their friends to get a free cheeseburger ("Friendship is strong, but the Whopper is stronger"), and still puts a cap of 5,000 on personal profiles' friends lists.

Last year's Oxford word of the year was the decidedly less mainstream "hypermiling."

A correction was made at 9:25 a.m. PT on November 21. It was players of PackRat, not PackRat itself, that were threatened with account suspension.

Originally posted at The Social
November 12, 2009 3:12 PM PST

Playdom exec: Social gaming to look 'a lot more like Hollywood'

by Caroline McCarthy
  • Post a comment

If social gaming is Hollywood, the people aren't as pretty. Well, maybe the avatars are.

Yes, yes, we know that social games are taking over the bloody world: earlier this week, gamemaker Playfish announced its $300 million sale to Electronic Arts, and on Thursday, rival Playdom retorted with the announcement of $43 million in venture funding at a $260 million valuation, and the acquisitions of smaller gaming companies Green Patch (manufacturer of Facebook-based games like Lil Green Patch and Farm Life) and Trippert Labs. Green Patch's games will up Playdom's reach on Facebook by 30 percent, the company said.

Expect to see more of these sales, as smaller developers find they're having trouble treading water in an industry where the big guys--Zynga, Playfish, Playdom--have chomped up most of the market share, and where Facebook, the biggest destination for these games, has shown that it can change the rules at whim. And the big companies, too, want to scramble to get bigger.

Plus, as Playdom co-founder and chairman Rick Thompson explained to CNET News: When gaming companies grow large, they have to deal with a lot of stuff that can get in the way of producing new games and staying on top of consumer trends. That's one reason to keep investing in new talent through acqusitions.

"The hitmakers start spending all their time on operations, and on things that don't improve or enhance the games, and so they become essentially owners and operators," he said. And likewise, "people who can create things shouldn't necessarily be operating a gaming company."

He drew the evolution of a social gaming company parallel to an entertainment studio: "a lot more like Hollywood or the traditional gaming industry" than a Web start-up.

But here's the catch when it comes to acquisitions in this space: Gaming, especially social gaming, is a hit-driven business. If a parent company buys up a hot Facebook game, that game could already be running out of shelf life: which is, indeed, sort of like a Hollywood establishment signing a contract with an actor who's had five hit films in a row, as he could easily be over the hill before long. (Hello, Rob Lowe.)

"I think we're getting pretty good at really looking at their data now, and modeling how these games will evolve over time," Thompson said. "But I think there's essentially a life cycle of growth and then decay. What we really look at in acquisitions is not just daily active users, but bringing on additional team members that can really help create new games in the future."

Originally posted at The Social
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