The Social

Twitter co-founder Biz Stone said at the Reuters Technology Summit on Monday that the ubiquitous microblogging start-up isn't considering an advertising-based business model at all.

The whole "we'll make money by offering corporate accounts of some sort" mantra has been talked about by Twitter's founders quite a bit recently. But until this point, Stone and co-founder Evan Williams haven't been quite this explicit in ruling out advertising altogether.

"There are a few reasons why we're not pursuing advertising--one is, it's just not quite as interesting to us," Stone said at the event.

Man, it sure is nice to be so high in Silicon Valley's pecking order that you can rule out a business model just because it's boring!

The other reason: Hiring an ad sales staff is labor-intensive, Stone told Reuters. Ads can also be intrusive to users. Now that makes a bit more sense.

The long-awaited Twitter business model, which the Reuters article describes as "various add-on tools and services for the businesses and professional users of Twitter," should be in effect by the end of the year.

You'd think, based on what the blogosphere is saying about dual sets of numbers in Advertising Age and VentureBeat, that Facebook has a new reason to freak out about revenues. Namely, signs point to the fact that the third-party developer platform that Facebook launched two years ago now collectively makes more money than the social network itself.

Well, of course it does.

From some of the headlines, you'd think that it were some sort of Silicon Valley equivalent of humans creating robots that eventually outstrip them in intelligence. While it's sort of amusing to think about Facebook CEO Mark Zuckerberg battling evil robots (cue up some Flaming Lips here), this actually should be a pretty unsurprising conclusion. Estimates indicate that the platform applications put together may make as much as $500 million in 2009, with the advertising-based Facebook pulling in $350 million to $500 million depending on who you ask. (It's a private company. They're allowed to answer that question with nothing more than sneaky smiles.)

Let's look at the latest (vague) figures. When Facebook announced the debut of its long-awaited "verified apps" program last week, the company said there are now more than 52,000 applications on the third-party developer platform--and counting. That's a lot. In other words, if the Facebook platform were a standalone business, I should certainly hope it would rake in a significant amount of money.

Granted, we'd have to crunch a lot of numbers and deal with a lot of variables in order to figure out the exact operating expenses and headcount of the platform. Some applications are created by lone developers living rent-free in a basement, whereas others are created by app development companies that employ dozens of people and pay hefty amounts of cash for office space in those trendy post-industrial lofts in dot-com-friendly neighborhoods.

It gets more complicated. Some apps are the Facebook-inhabiting arms of much bigger social media companies, or are branded advertising or marketing campaigns on behalf of corporations that otherwise have zilch to do with tech. Then there are the development firms, consultants, agencies, and countless investors who also have a stake in it. Facebook itself, last time we checked, still had fewer than 1,000 full-time employees.

Conclusion: I don't know how many people and companies can claim to be on the Facebook platform's payroll, but it's a lot. And considering the platform as a whole has been much more adventurous with revenue strategies than Facebook itself has, I should certainly hope it's been raking in the cash for some time now.

So then there's the assertion brought up by AdAge's Michael Learmonth, that Facebook is pretty much sitting on a goldmine here. Which brings back the evil-robot thinking. Once again, Facebook is dealing with a massive and extremely diverse set of individuals and companies here. Social games manufacturer Zynga may be rolling in cash, but there are loads of other apps on the platform that don't make a cent. Has Facebook let the platform get too big and too amorphous for it to wrangle decent revenues out of it? ("I'm sorry, Mark. I'm afraid I can't do that.")

Which is why there are two things to watch here. One is the rollout of Verified Apps, which may have some unannounced or even under-the-table benefits that Facebook hasn't hinted at yet. Facebook's key terms for Verified Apps acceptance are "trustworthy" and "meaningful." But I wouldn't be at all surprised if "can make money, and can help us do so, too" is an unspoken criterion. Verified Apps will give Facebook the opportunity to work closely with a much more uniform and manageable set of developers and companies who have already shown a decent degree of loyalty to the social network.

Second, there's Facebook's finally-coming-soon (or is it?) Holy Grail of revenues, which is either a virtual currency system for developers or a PayPal-like transaction platform, or maybe a bit of both. The latest signs indicate that Facebook will be expanding the "credits" system it uses for its in-house Gifts application to select developers. Beyond that, it's not clear how it will expand.

With both a potential monetization strategy in place, and a policy (Verified Apps) to keep it from turning into a free-for-all that could start eating up cash rather than pulling it in, Facebook is all set. Or, if you prefer the hyped-up version, it almost has the arsenal in place to take on those evil robots.

AUSTIN, Texas--With panels and discussions every year about social engineering, hacking, remixing, and culture jamming, South by Southwest Interactive is the must-attend conference for geeks who want to shake things up.

Maybe that's why the many panels at the conference about the future of media--from print to broadcast to music to film--were tinged with the message that fast, often radical change is necessary. With panel topics like "How Copyright Law Failed The Digital Age," "New Think for Old Publishers," and "Old Media Finds New Voice Through Twitter," this year's SXSWi promised to offer a blunt take on some longstanding stalwarts of the media industry that now lie in states ranging from evolutionary flux to full-out crisis mode. The Austin Convention Center was buzzing with talk of the future, but there was no denying the upheaval going on outside.

The short version of the long version we all know: Traditional moneymaking strategies across the media landscape are losing steam. While solutions from interactive ads to subscriptions to micropayments to social-network "app-vertising" to all sorts of digital sales models have been pitched and put into effect in this new world of iPods and Kindles and YouTube and a dozen different streaming media services, the digital revenues aren't keeping pace with what's being lost. A nasty recession just throws a big, costly fork into the equation.

"I should set up, like, a little picture of me (on my Web site) with a picture of a pirate eye patch on, saying 'Arrrr, give me five dollars!'" said documentarian Morgan Spurlock in a panel called "The Future of the DVD and Digital Distribution," when the topic shifted to the long-shot possibility of asking for donations to combat piracy.

He was joking, obviously. But SXSWi panelists as a whole seemed to indicate that struggling media companies shouldn't just embrace the cutting edge, they should more or less dive off it headlong.

"There is no low-risk solution to innovation. When times are tough, brands and agencies and everyone has a tendency to say, 'Well I don't want to experiment,'" said Patrick Moorhead, director of emerging media at the Microsoft-owned ad firm Razorfish, in a panel discussion on Saturday morning about innovation during a recession. "Our belief is that if you stick with what you've got, that's a bigger risk than taking a risk on emerging media and testing something new that could potentially teach you something."

Moorhead showed off "NewsBreaker Live," an ad campaign created for MSNBC in which motion sensors in participating movie theaters let the audience play a full-body version of a "Pong"-like game to capture real news headlines. It certainly livened up the panel, even though no one could really see closely enough to read the actual headlines.

"South by Southwest, from what I can tell, it's very much end-filtered," said Eric Feng, chief technology officer at Hulu, the joint video venture between News Corp. and NBC Universal. "I think it really prides itself on a free spirit, and you're going to get honest feedback from real people, real users, real companies, a lot more so than some of the other conferences you might go to."

So you'd think that this is the sort of place where the old media's struggling elite might show up in search of a few answers, however out of left field they might be.

But they're hard to find. Wander the halls of the Austin Convention Center during SXSWi, and you'll run into loads of start-up entrepreneurs, digital marketers, and representatives from both traditional and outside-the-box advertising agencies. Traditional media companies on both the print and broadcast fronts, however, are tougher to track down. It's unclear as to just how much of a presence the likes of a major broadcast player or a national newspaper has at SXSWi--it's easy to get lost in the hordes of developers and designers.

"I assume they're here," said Avner Ronen, CEO of the video software start-up Boxee, which has made waves recently for offering a well-received product and getting into a sort of content feud with Hulu and its video partners. "I haven't run into them."

Kevin Marks, a Google product manager who has been working on its Friend Connect product and marketing it to some traditional media properties, thought differently. He pointed to panels like "Designing the Future of the New York Times," in which designers from the struggling newspaper talked about their attempts to propel it into the digital world. "I was very impressed with the (traditional) news people here who say, 'We have this problem and we're finding ways to work through it. We're going to work with the Web,'" Marks said in an interview.

On the other hand, there are dangers in listening too closely to the digerati. SXSWi attracts a self-selecting crowd of well-educated futurists who live primarily in major cities or academic hubs, a good number of whom are probably quite confident that the digital revolution is in full force just about everywhere. It's a truism best personified by the fact that the concentration of Apple's iPhone, the quintessential gadget of the tech-savvy and hyperconnected, was so high in Austin during SXSWi that carrier AT&T had to boost its infrastructure for the week. Attendees are invariably in the company of very bright people on the bleeding edge of digital media. But this can be a myopic bunch.

Ricky Van Veen, co-founder of entertainment brand CollegeHumor, pointed out in a Saturday panel called "Comedy on Television and the Web" that even though canceling cable subscriptions and even ditching TVs altogether is trendy among young people in cities like New York and San Francisco, a recent study showed that the trend nationwide is very different. A start-up like Boxee or even Hulu doesn't have the "wow" factor in a suburban household that watches "Dancing With The Stars" on TV in the evenings as it does in a city apartment where the broadcast airing of "The Office" conflicts with happy hour. "The average American watches 151 hours of television per month," Van Veen said, citing Nielsen statistics from last month. "That's an all-time high."

In an interview with CNET News on Monday, Hulu's Eric Feng concurred. "For the Super Bowl you had a hundred million people tune into one event. You still can't amass that type of audience in an online environment."

But however edgy some of the thinking may be at SXSWi, and however much its demographic may deviate from the U.S. population as a whole, the revenue crisis is real, and this is one of the places where it takes center stage. According to Avner Ronen, the sense of uncertainty over profits is what's holding back some of the innovation that SXSWi's masses are so eager to set in motion.

"That's what's scary for the media companies dealing with Boxee," he said. "They saw what happened with newspapers. It's unlike the record industry, it's not like they fought it. They endorsed it, they executed very well against it, it's just...the analog dollars to digital pennies thing."

Right now, many of them are at the point where they could use some insight--even the wacky kind with eye patches.

Last month, Twitter posted a job listing saying it was looking for someone who knew business, and now it looks like the microblogging site has found one--the first of several, it appears. Twitter has hired Kevin Thau, a veteran of tech companies Buzzwire and Openwave, as its director of mobile business development.

According to Twitter stats app Twitterholic, Thau has been using Twitter since early March of last year. He's been hired in part to handle the "crushing amount" of partnership proposals that Twitter receives. The mobile front is particularly important for Twitter, as it's the primary platform for many users. It's also been a contentious space, because it involves dealing with cell phone carriers around the world. Skyrocketing costs have forced Twitter to cut some of its international mobile numbers.

It's the first business development post that the San Francisco-based Twitter has filled. But it's currently also looking to hire a business product manager and a director of strategic partnerships. Twitter hasn't put forth a concrete business plan yet, but executives have hinted that business partnerships or corporate accounts may be part of the strategy.

It was only a matter of time. Social network Facebook says it has hit the milestone of 150 million active users, just more than two months after reaching 120 million and about four months after reaching 100 million. The site hit 140 million in the middle of December.

The announcement was made on the Facebook company blog by founder and CEO Mark Zuckerberg. Should Facebook sustain this rate of growth, the 5-year-old site could hit 200 million users before Zuckerberg reaches his 25th birthday this spring.

Nearly half of those 150 million members, Zuckerberg wrote, use Facebook every day. Most of the site's new members now come from outside the United States. "This includes people in every continent--even Antarctica," the post read. "If Facebook were a country, it would be the eighth most populated in the world, just ahead of Japan, Russia, and Nigeria."

But Facebook Nation wouldn't be a financial heavyweight just yet. The company has made it clear that right now, it's focusing on growth over revenues.

That can be precarious, especially during difficult financial times, when Facebook's deep-pocketed backers may find those pockets a bit shallower. As some critics have pointed out, server power and other infrastructure costs are not as cheap internationally as they are in the States.

Reaching a milestone like this is obviously a big victory for Zuckerberg and the rest of Facebook, and the company insists that it's in solid financial shape to handle this kind of growth. That said, it'll only escalate the speculation--did anyone really believe that gossip about Facebook would end along with 2008?

Another sign that Twitter is finally growing up: The company has put out a job posting hunting for a product manager to help it start raking in revenue. The San Francisco start-up, flush with venture funding and media hype, has yet to make a cent.

"As Twitter's first product manager focused on revenue generation, you will play a defining role in the formulation of Twitter's business," the job description reads.

Gee! You don't say?

Twitter CEO Evan Williams has hinted that the future of Twitter lies in some sort of corporate accounts. And indeed, the job posting says the gig involves the creation of "products and feature sets of commercial-oriented Twitter applications."

But it also asks for "strong familiarity with online advertising and marketing models," which means that Twitter advertisements may not be off the blocks.

There's a big Wall Street Journal piece on Tuesday about how MySpace is still seriously beating Facebook in the advertising and marketing game, regardless of the fact that Facebook has started to breeze past it in traffic.

This is one of those stories geared toward the Journal's less technical readers, undoubtedly, since most of the details are no surprise to social media junkies. But the take-home point is a good one: Big media ownership has been helpful to MySpace, whereas the independent Facebook is still learning the advertising game.

MySpace is owned by News Corp. (which also owns the Wall Street Journal) and hence has much deeper and more established connections to Madison Avenue. MySpace is also more heavily reliant on traditional display ads, whereas Facebook has chosen to take a more difficult route with "engagement ads," announced in August, and other forms of "social advertising." It's part of CEO Mark Zuckerberg's continual mantra of "focus on innovation and the profits will come eventually."

But Facebook had some notable success recently with a Ben & Jerry's "engagement ad" on Election Day. The ice cream company sponsored an event RSVP that appeared on Facebook's home page, where members could respond "yes" or "no" to its Election Day offer of free ice cream for anyone who voted. RSVPs from friends would show up in members' news feeds, meaning more exposure for Ben & Jerry's. And if the snaking line I saw outside a Ben & Jerry's near NYU last Tuesday night was any indicator, the marketing effort worked.

In other words, this advertising race isn't over yet.

Kara Swisher at All Things Digital reported on Thursday night that Facebook held an all-hands meeting earlier in the day to talk company finances--and that CEO Mark Zuckerberg was remarkably candid.

The 23-year-old executive announced that projected revenue for 2008 had been elevated from $300 million to $350 million; that's a big jump up from its 2007 revenue of $150 million. For better or worse, the privately held company plans to spend $200 million this year on capital expenditures (as Swisher puts it, "a whole lot of servers"), and Facebook's employee headcount is expected to rise from about 450 to over 1,000.

The company's EBITDA (earnings before interest, taxes, depreciation, and amortization), according to Swisher's report of Zuckerberg's speech, will be about $50 million for 2008. With $200 million in capital expenditures, that means the company has a negative cash flow of $150 million. Numbers like that are the sort of thing that a more seasoned CEO might think twice about discussing semi-publicly; the dial-in number for remote access to the event was accessible enough that Swisher was able to listen in.

We're also at a point where confidence in social-media business models isn't exactly at a high point. Google's fourth-quarter earnings report on Thursday revealed that its advertising deal with Facebook rival MySpace.com hasn't been so lucrative.

Still, Zuckerberg has reason to be confident--for the time being. The young company is full of investor cash, including $240 million from Microsoft, that pegs Facebook at a staggering $15 billion valuation. Expect the IPO chatter to continue.