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.
Wow. There is money out there: a retail deals site called Groupon has raised a whopping $30 million Series B funding round led by Accel Partners, one of Facebook's early backers. Existing Groupon investor NEA, which led the company's $4.8 million Series A round in January 2008, also contributed.
Here is the gist of Groupon: there are currently editions for 26 U.S. cities. The site advertises a deal each day from a selected local establishment like a restaurant, nail salon, or gym. There's a heavy discount involved. But enough members have to opt into the deal in order for any of them to get it. Groupon takes a cut of earnings if the deal hits the "tipping point" and goes live; otherwise, the featured merchant does not have to pay.
They've been profitable since June, founder and CEO Andrew Mason told CNET. So why raise $30 million? "We want to roll out to another 50 cities or so next year," he said, adding that early in 2010 it hopes to expand to Canadian cities, "so it's just going to help us increase the rate of customer acquisition and focus on building new technology." He wouldn't say what that new technology is, but he did add that the company went from 10 to 120 employees in the past year and planned to continue to grow at that rate.
The company grew out of an existing start-up called ThePoint, which applied a similar "collective" model to community and activism projects, before switching entirely to the retail model.
Sony Music Entertainment's catalog is coming to indie music retail site Amie Street, in the New York-based start-up's first major label deal.
But here's the catch: Sony's catalog will not be participating in the "dynamic pricing" model that's been Amie Street's trademark--unpopular songs are the cheapest, and the price rises as a song is downloaded more. Instead, Sony songs will be available for a flat 69 cents, 99 cents, or $1.29 based on popularity.
"It wasn't a hard decision for us," Amie Street co-founder Josh Boltuch told CNET News. "This isn't affecting all the other dynamically priced music on the site." He noted that RED, the indie music distribution company owned by Sony, already offers its songs on Amie Street through the dynamic-pricing model. "Sony Music obviously has the option to experiment with dynamic pricing at their discretion," Boltuch added. "Clearly we would love to do that with them."
This isn't the first time that an indie music retailer has had to compromise to ink a major-label deal. Sony was also the first major label to bring its catalog--well, its "classic" back catalog--to subscription site eMusic. But the deal resulted in eMusic raising some of its prices in tandem.
Amie Street, which pitches itself as a way to discover as well as purchase new music, made major headlines last year when it was the only place on the Web to buy songs recorded by Ashley Alexandra Dupre, the call-girl-slash-aspiring-pop-star at the center of the Eliot Spitzer scandal.
Buzzworthy social music service Project Playlist has signed another major-label deal: EMI Music has licensed its catalog to the company, which hired former Facebook executive Owen Van Natta as its CEO in November and says that over 52 million playlists have been created to date by its over 42 million registered users.
The first major-label deal for Project Playlist was with Sony BMG, an agreement announced in December. The company had previously been sued by a number of big players in the music industry, including EMI, because of the amount of unauthorized content uploaded to its servers. The Recording Industry Association of America (RIAA) also threw its hat in the lawsuit ring, and social networks MySpace and Facebook banned Project Playlist's embeddable widgets.
Music industry sources say that the RIAA's suit on behalf of the major labels was not dropped and that the industry group is still overseeing the case even though Sony BMG and EMI are not part of it.
"It is crucial for us to continue connecting our users with more of their favorite music," Van Natta said in a release. "This partnership will provide us with a wide-ranging selection of content to satisfy our users' appetites to share and purchase music. We are excited to now have both EMI and Sony BMG music catalogs available and we hope to continue to expand and enhance our service."
There are plenty of competitors for Project Playlist in the social music space: other big players are MySpace's own MySpace Music, which reportedly had sought Van Natta to spearhead the project; Last.fm (owned by CNET News publisher CBS Interactive); and Imeem, which was rumored to be in talks with Project Playlist for a possible merger. We haven't heard much about that recently.
This post was updated at 10:28 a.m. PT with information about the RIAA's suit against Project Playlist.
It's been a tumultuous few days for Yahoo--you know, with that takeover bid from Microsoft--but the company continues to shake things up internally, too.
On Monday, the company announced that it will discontinue its Yahoo Music Unlimited subscription service and will transfer its customers to RealNetworks' Rhapsody service.
In mid-2008, Yahoo Music Unlimited subscribers will be guided through an in-browser process to convert their music libraries to Rhapsody's service. For a limited time (length unknown), they'll be able to keep paying Yahoo's subscription fees, which cap out at $8.99 per month, before being required to start paying Rhapsody's $12.99 monthly fee.
Additionally, Yahoo announced in conjunction that it has acquired FoxyTunes, a browser plug-in that is compatible with multiple desktop and Web-based music players.
RealNetworks, which acquired Rhapsody when it purchased parent Listen.com for $36 million in 2003, has been partnering with both hardware manufacturers like TiVo and media companies like Viacom's MTV Networks. It's the company's best strategy for staying afloat in a digital music landscape that's not only dominated by Apple's iTunes but also seems to be gravitating toward "free," not subscription-based models.
But the announcement with Yahoo is shrouded in uncertainty, for obvious reasons. Just about anything could happen to Yahoo if Microsoft's proposed $44.6 billion acquisition goes through.
RealNetworks, ironically, has a hostile history with Microsoft, too, dating back to an antitrust scuffle several years ago that led to a partnership in which RealNetworks ultimately claimed it was shortchanged.
MySpace and Skype are set to announce on Wednesday that the eBay-owned telephony client will be providing voice chat services for the News Corp.-owned social network's instant messaging client, MySpaceIM. Financial terms of the partnership were not disclosed.
Through this deal, MySpace users will be able to link their profiles to Skype accounts, and will be able to place voice chat calls through the MySpaceIM client or the Skype client to both Skype and MySpace members--but if your MySpace profile is set to "private," you will be exempt from calls from people who aren't on your friends list. The service will be available in the 20 countries where MySpace has "localized communities."
A joint release for the two companies emphasized the sheer number of users that this will encompass: "With more than 110 million monthly active MySpace users and 220 million Skype registered users around the world, this partnership connects two of the most popular communications platforms on the Internet to create the world's largest online, voice-connected community."
But at the same time, only 25 million out of MySpace's 110 million active users have downloaded the MySpaceIM client. And neither company is at the top of its game. MySpace still leads the social-networking field in membership and traffic, but has lost its place in the spotlight to fast-growing rival Facebook. And Skype hasn't exactly turned out to be a real winner for eBay, with some critics saying that the two are mismatched.
Presumably, this will be the "MySpace announcement" that is rumored to take place Wednesday at the Web 2.0 Summit in San Francisco. It was originally thought that this announcement would unveil a developer platform for MySpace akin to Facebook's, but credible sources quickly began to hint to multiple news outlets, including CNET News.com, that this would not be the case--a source for gossip blog Valleywag, in fact, indicated that the announcement would deal with the MySpaceIM client.
NB: The original title of this post, "Google To Acquire Controlling Stake in Microsoft," never made it past the draft stages.
Expect an onslaught of emo jokes: Satire publication The Onion will be providing audio, video, and print content to social-networking site MySpace through a partnership announced on Tuesday night. There is now a branded Onion page on MySpace, with article and blog content as well as audio podcasts; additionally, content from the publication's online video hub, the Onion News Network, is now available on the MySpaceTV portal.
The press release issued by the New York-based Onion (a full version is posted at the Silicon Alley Insider) is naturally tongue-in-cheek. "The news business is like the tobacco business: you want to reach new readers at as young and impressionable an age as possible," Sean Mills, president of The Onion, is quoted as saying. "MySpace was, of course, a natural partner in that regard."
"The Wall Street Journal is all well and good, but the Onion News Network represents the best in hard-hitting investigative journalism (at least on MySpace)," Jeff Berman, general manager of MySpace TV, added facetiously. "Also, we lost a bet."
The press release also gave some statistics that presumably are not a joke: The Onion boasts 4 million online readers and 3 million print readers per month. It's not yet clear how much of the Onion content on MySpace will be exclusive to the new branded page other than a new "Staff Blog," but we have pinged MySpace representatives and will provide more detail on Wednesday.
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