Posts tagged Billions
Guest author Fei Deng is a co-founder of Embedle, a Twitter tool for networking with like-minded tweeters.
Twitter’s IPO, the most anticipated offering of 2013, will most likely hit the public markets soon. While the company is on pace to reach $1 billion in revenue by 2014, it’s still unprofitable. Its S-1 amendment indicates it likely won’t turn a profit this year, despite all Twitter’s efforts to draw in more users and advertisers.
But it might not take that much to push Twitter not only into profitability, but well into “moon shot” territory (per this valuation analysis by NYU finance professor Aswath Damodaran). Consider just two revenue streams that have the potential to make billions of dollars for Twitter, and which could value the company at more than $60 billion as early as next year. (For reference, Twitter is currently seeking a valuation of up to $13.6 billion.)
Let Us Help Market Your Apps
Twitter cards, introduced earlier this year, allow users to attach images and video to tweets—which Twitter now displays to all viewers in their feeds. Although the feature gets less attention, cards also support app installs and deep-linking. That means mobile users can tap a link in Twitter cards that will open up, say, a video in a corresponding app. If they don’t have the app, the link will offer to install it.
The problem is, many people habitually tap links directly from tweets instead of opening the tweets and tapping from the Twitter card. When users tap a link in tweets, it opens a webpage in a browser, even if users have already installed a corresponding app.
This can be a major loss for e-commerce and marketplace businesses, since there’s a big difference between someone who lands on a website but can’t buy anything without logging in and someone who lands on a product page in an app where they’re already signed into their stored payment credentials.
But what if Twitter were to support app installs and deep-linking when users tap a link in tweets? That would serve users and create a big revenue stream at the same time. (It may, in fact, already be actively considering this sort of business.)
Let’s consider an example.
Suppose a mobile user taps the link in a tweet from CNN. If she doesn’t already have the CNN app installed, she’d end up on the webpage of the link (as usual), but with an overlay that prompts her to install the app. If she already has the app, it would launch and display the story.
Twitter could generate additional revenue with a new app-install reference service for publishers who register as Twitter advertisers. So whenever a user taps a link to a participating publisher’s material—a la the CNN link in the above example—Twitter will automatically offer to install the publisher’s app if the user doesn’t already have it. Of course, it will then charge publishers a fee for each installation.
This could be a very good deal for publishers: they only pay once for an app install referral, then get all the subsequent app access referrals for free. This could turn Twitter into a powerful referral engine for app installations. That would free publishers to focus on creating great apps for users without worrying too much about how to get people to actually install and use them.
This would also give app developers extra incentive to integrate with Twitter and encourage their users to share app stories, pictures and video to Twitter from their apps. For example, a game app could make it easy for users to share high score screenshots to Twitter, which could lead to more app installs and access.
Let’s do the math: how much money could Twitter make from this app install business? I’ve used some fairly conservative assumptions here, which I’ll explain in greater detail below.
Currently, Twitter has 175 million monthly active mobile users. At a 30% year-over-year growth rate—its growth currently stands at 39% year-over-year—Twitter will have an average of 220 million monthly active mobile users next year.
If the average mobile user installs three apps per year—not an unreasonable assumption, given that the average Twitter user sees more than 2700 Twitter timeline views every year—and Twitter charges publishers $2 for each app install, then total annual revenue from the app install business would be:
220 million mobile users * 3 app installs per year * $2 per app install = $1.3 billion
(Background and assumptions: From Twitter’s S-1 filing, we know that in Q3 it had 685 timeline views per monthly average user, which translates to 913 timeline views per user every four months. Some analysts estimate that Facebook charges advertisers $2 to $3 per app install, and sometimes $3 to $4 or more; I’ve assumed Twitter can come in on the low end of that range.)
Come, Let Us Click Paid Links Together
Twitter’s related headlines feature makes it easier to find published stories and videos that are related to a tweet. On a tweet’s permalink page, a “related headlines” section automatically lists and links to websites where the tweet was embedded. This feature adds helpful context and makes it easier to discover related stories.
Now suppose Twitter turns some of those related headlines into paid links and makes this feature more visible—say, by displaying them when tweets are expanded. In fact, Twitter could add paid links even where it’s not currently displaying related headlines, since so far, at least, related headlines are relatively few and far between in many timelines.
This could be another big revenue stream.
Paid links should be relevant and valuable to users so as not to waste their time. Such “content marketing” links appear on the websites of many major publishers, including CNN, the New York Times and the Wall Street Journal. To quickly turn this related headlines feature into a content marketing business, Twitter might consider acquiring Outbrain, Taboola or Disqus, all of which specialize in such services.
Some users may not like the idea of having related links shown below their tweets. (That could especially be the case if the links are as click-baity as many of Outbrain’s and Taboola’s related links are.) One possible solution is to allow users to opt-out by charging them a nominal fee. An extra benefit to these paying users could be giving them a “verified” status since they bind their credit cards or bank info. Twitter cards + credit cards = e-commerce. You get the idea.
Let’s do math again: how much money could Twitter make from this content marketing business?
In the third quarter of 2013, Twitter had 159 billion timeline views. At 30% year-over-year growth rate, Twitter will have about 800 billion timeline views in 2014.
Let’s assume users see the related links of one tweet for each timeline view (by expanding tweets or visiting the permalink page of tweets), and the click through rate (CTR) of related links is 1%, and Twitter charges publishers ten cents for each click, then the total revenue from the content marketing business would be:
800 billion timeline views * one related link per timeline view * 1% CTR * 10 cents per click = $800 million
(Background and assumptions: Twitter’s “promoted tweets” have engagement rates of 1% to 3%; aggregate CTR in an IDG experiment with Outbrain ranged from 0.3% to 3.5%. So a 1% CTR for paid links seems reasonable, particularly given that they’ll appear after a short 140-character message instead of at the end of a longer article. Similarly, Outbrain’s cost-per-click can range from five cents to $5, so 10 cents for Twitter puts it at the low end of its possible range.)
What That All Means
If these assumptions are correct, and Twitter adopts these two businesses and executes them well, the firm’s 2014 total revenue could reach:
$1.3 billion (app install) + $800 million (content marketing) + $1 billion (current products) = $3.1 billion
Facebook trades at 20 times revenue. LinkedIn fetches about 21 times revenue. If we do the comparison, Twitter’s 2014 valuation could be $3.1 billion * 20 = $62 billion. Let’s just say, that’s way more than the $13.6 billion valuation assumed in Twitter’s revised IPO filings.
Of course, both of these new revenue streams are just speculation at this point. But several things are clear:
- With its huge user base, Twitter has enormous revenue leverage;
- Mobile will become the money machine for Twitter, as at other Internet firms;
- Twitter will become more like a media hub.
Disclosure: I don’t own shares of Twitter, nor am I affiliated with it in any way—except for the fact that my startup embedle.com develops a Twitter tool for networking with like-minded tweeters. Even though I’m extremely bullish on Twitter, this article is just my personal opinion, not investment advice. Viewer discretion is advised.
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Right after the revelations from Edward Snowden about the alleged secret NSA program known as PRISM, there was speculation on ReadWrite about the fallout from the existence of a government program that could with seeming impunity dip its data-gathering hands into anyone’s cloud data at any time.
Now that speculation has some numbers to attach. A new whitepaper from the Information Technology & Innovation Foundation (ITIF) estimates that the U.S. cloud computing sector could stand to lose up to $35 billion over the next three years as a result of companies pulling back from cloud computing.
Update: A blog post from Forrester analyst James Staten indicates that the ITIF estimate of the impact to the cloud sector may be far too low.
“We think this estimate is too low and could be as high as $180 billion or a 25% hit to overall IT service provider revenues in that same timeframe. That is, if you believe the assumption that government spying is more a concern than the business benefits of going cloud,” Staten wrote.
Since PRISM is supposed to be aimed at non-U.S. citizens, the ITIF postulates, international companies are likely to be the most adverse to using U.S.-based cloud services. If 10% of international business flees U.S. cloud vendors, then the three-year hit will be $21.5 billion. But if 20% of global companies parts ways with U.S. cloud businesses, then the sector would see that $35 billion loss.
The ITIF suspects that many international governments and cloud vendors are bound to try to exploit PRISM. Indeed, European and Asian vendors have already been using the U.S. Patriot Act for quite some time to scare potential customers into basing their data in home-grown cloud services.
Reinhard Clemens, CEO of Deutsche Telekom’s T-systems group, argued in 2011 that creating a German or European cloud computing certification could advantage domestic cloud computing providers. He stated, ‘The Americans say that no matter what happens I’ll release the data to the government if I’m forced to do so, from anywhere in the world. Certain German companies don’t want others to access their systems. That’s why we’re well-positioned if we can say we’re a European provider in a European legal sphere and no American can get to them.’
PRISM, then, is just pouring gasoline on an already burning fire, according to the ITIF.
Staten believes companies may think twice about moving to cloud services anywhere. His reasoning? Government surveillance programs are not just confined to the U.S., which is bad enough. They may be global.
Add it all up and you have a net loss for the service provider space of about $180 billion by 2016 which would be roughly a 25% decline in the overall IT services market by that final year, using Forrester market estimates. All from the unveiling of a single kangaroo-court action called PRISM.
But Staten is not sounding the evacuation alarms. He believes that with careful planning, the benefits of cloud computing will still far outweigh the risk factors for any business.
The fact of the matter is that the IT services market is a part of our portfolios because it provides capabilities we value either against IT or business metrics. And it’s highly likely these values are worth more to you than the potential risk you think your company faces due to government surveillance.
Given the increasing paranoia about surveillance, businesses will need much cooler heads if they are going to actually stick with cloud computing and reap such benefits.
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Editor’s note: This post was originally published by our partners at PopSugar Tech.
“The day someone says ‘Let’s stop exploring,’ we might as well move back into the cave, because that’s where we’ll land,” astrophysicist Neil deGrasse Tyson told us in regard to why his latest project, the return of science show Cosmos, is such an important milestone for TV, and Americans as a whole.
It’s been 33 years since Carl Sagan’s Cosmos: A Personal Voyage first aired on PBS and turned viewers’ sights to the infinite universe, and the upcoming Cosmos: A Spacetime Odyssey picks up where its predecessor left off, focusing on the story of the universe, and making these concepts accessible to a mainstream audience with a taste for Hollywood-style special effects.
Cosmos has left such an impression even decades after its initial release due to the format of the show. It “wasn’t simply opening up science books and teaching pages ripped from it,” Neil said during a Comic-Con press session. “It spent time learning, exploring how to make science matter to you as a human being, as a citizen, as a species with a capacity to reflect upon its own existence.”
The new Cosmos comes with a renown science and entertainment pedigree, counting Ann Druyan, co-writer of the first Cosmos series alongside her late husband Carl Sagan, as a writer, along with director of photographer Bill Pope, known for his work in the Matrix trilogy, producer Brannon Braga, a Star Trek: The Next Generation alum, and Family Guy creator Seth McFarlane as an executive producer. The involvement of a comedian known for his crass jokes may seem surprising, but with his influence at Fox, Seth was the driving force behind bringing Cosmos to its 8 p.m. Sunday night spot beginning February 2014 on the network, and has included references to the original show in an episode of Family Guy. In fact, Ann recounted a conversation with Seth in which he told her that with the exception of this parents, no two people besides herself and Carl have had as much influence on his life.
It’s with the big studio backing, that the show is able to include blockbuster-scale visual effects that blend “graphic novel”-style animations with space photos provided by NASA, and virtual sensations. As seen in the trailer above, Neil travels with viewers through locations in the universe. An impressive scene Brannon said they’re still working on shows “Neil on Mars, but as seen through the point of view of a rover. It’s following him around and handing him a rock, doing all this cool stuff.”
Bringing the story of space and time is a deep passion of all those involved we spoke with during Comic-Con, which all but guarantees it gets translated to the show. “I have high expectations that it will change the mood of the country, so people will come to value science,” Neil said. Based on the crowd that greeted Neil, Ann, and Brannon during the Cosmos panel in one of Comic-Con’s biggest event rooms, the Indigo Ballroom, it’s a passion many viewers will hold as well. The group was met with standing ovations both when they entered and exited the stage, showing a fan base to rival the Hollywood mainstays in Hall H, and seemed ready to take on science exploration.
For more from the Cosmos panel, check out this recap, complete with typical Neil deGrasse Tyson humor:
Images via Kelly Schwarze and Getty
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Microsoft paid Nokia $250 million in the fourth quarter to adopt the Windows Phone operating system, according to Nokia’s fourth-quarter earnings report released Thursday.
That was the first in a series of so-called “platform support” payments believed to eventually total billions of dollars. To date, Microsoft and Nokia have been quiet about the deal’s specifics – perhaps because it appears as if Microsoft is paying Nokia significantly less than its paying other cellphone manufacturers.
“Our broad strategic agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft” Nokia said in its results today. “We have a competitive software royalty structure, which includes minimum software royalty commitments.”
Slashegear’s Chris Davies is suggesting Microsoft’s Nokia arrangement is less than that it has struck with other cellphone makers. LTE, for example, is reportedly paying about $27 for each phone it sells with Windows Phone.
“Over the life of the agreement both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US Dollars,” Nokia said.
Windows Phone has gotten rave reviews, but Microsoft could struggle to get developers to create apps for the phone. By some estimates, Windows Phone could pass Apple’s iOS in market share by 2015.
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We’ve written here before in ReadWriteWeb about the bad side of Android platform diversity: multiple phone manufacturers with one or more carriers apiece, simultaneously supporting more than one active version of the operating system. One can’t help but think that Microsoft has handled Windows platform transitions better than this, but then again, Windows doesn’t have to appease the interests of carriers and manufacturers.
Now, an intensive 12-month study by mobile communications analysis firm WDS Global has come up with a quantifiable metric for the cumulative effects of platform fragmentation on carriers, and subsequently on consumers, based on estimates of 2011 Android smartphone shipments: The frustration from customers who have been unable to resolve their hardware and software issues through customer support, and end up returning their phones for replacement, ends up costing U.S. carriers a combined total of $2 billion annually.
Contrary to numerous reports, the WDS report published yesterday did not say that Android-based smartphones were more susceptible to hardware failures or problems. In fact, the report explicitly states, “Android devices are no easier, nor more difficult, to troubleshoot than a comparative product from an alternate OS vendor.” What the report states is that Android smartphones (excluding tablets), by virtue of the multiplicity of versions actively in the market, incur more carrier costs with respect to time spent conducting customer support, coupled with the wide array of brands both large and small that carriers find themselves supporting.
“At the point-of-sale many consumers (and retailers alike) are assuming a degree of consistency across Android devices that in some cases doesn’t exist,” reads the WDS report. “Even migrating from one Android device to the next can bring about problems as consumers’ expectations for performance are dismantled by a different hardware build and by potentially resource-hungry operator and manufacturer overlays.”
Monthly fragmentation of actively supported Android versions since March 2010. [Courtesy WDS Global]
For instance, first-time customers of the Android Market end up learning (often the hard way) that certain apps will not work with their specific build of Android. In some cases, modifications and permissions made by carriers themselves end up conflicting with installed apps. And when carriers’ support representatives help their customers upgrade to newly supported Android versions once it does become time, customers discover a few extra, unanticipated surprises.
“In one example from 2010, a UK operator was forced to apologize to its customers after fielding a storm of complaints from users unhappy with the addition of ‘bloatware’ – unnecessary software added by the operator that couldn’t easily be removed, in an Android 2.1 update,” the report preaches to the choir. “Customers complained that the additions slowed their devices and inhibited some functionality (including SMS notifications).”
Do we know the additional costs carriers may be incurring during the customer support phase itself, before customers turn in their phones for replacements? RWW asked Tim Deluca-Smith, WDS’ Vice President for Marketing: “As for additional support center costs, the actual cost of supporting Android in the ‘traditional’ sense is no different to other platforms – i.e., the duration of a tech support call, and the propensity for a customer to call with a problem is consistent with other platforms,” Deluca-Smith.
“The real cost comes in the fact that hardware faults add logistics costs,” he tells us. As the firm tries to make clear (but may be having a hard time accomplishing), it so happens that smartphones that happen to run Android are the ones with the hardware troubles. Android itself, WDS believes, is not the reason.
“While Android deployments may show a higher propensity to hardware failures than rival OS platforms, analysis of these hardware faults shows no principle defects on the platform; i. e., the platform is not predisposed to one particular hardware defect,” the report reads. “Instead, the distribution of hardware faults against weighted averages deviates by less than 1% in all categories. In this instance, Android actually benefits from deployment across multiple reference designs and component variants. This means that the brand is unlikely to be associated with a specific hardware shortcoming.”
Two of the metrics the WDS team examined were average handle time, which refers to how long it takes customer support at any level to devote to a customer issue; and propensity to call (PTC), which refers to the likelihood that a shipment batch of 10,000 or so devices will generate support instances at a high, “tier-3″ level. While AHT is typically a function of the quality of customer support, PTC is a function of the complexity of the hardware and its supporting firmware, and is tallied as the ratio of phones returned to phones shipped. If PTC eclipsed the 15% mark, carriers would attribute that figure to defective phones. As it stands for 2011, WDS estimates PTC for Android phones at 14%, and the ratio of incidents actually attributable to hardware failure in the end at 12.6%.
By contrast, Windows Phone 7 PTC rates for the year are about 11%, with hardware failure at 9.3%. Apple iPhone failure rates for the year are likely to top out at 8%, and for RIM BlackBerry, 5.5%.
“You could make the assumption that, while traditional support costs are consistent,” says Deluca-Smith, “the average profitability of a batch [shipment] of devices is reduced because of the reverse logistics / repair costs.”
Quarterly breakdown of carriers supporting Android since Q1 2009. [Courtesy WDS Global]
Android has helped smaller manufacturers enter the industry sooner, and make a dent in the market. The result is what the industry calls the “long-tail effect,” using a term that may have spread with the help of a July 2009 WDS report (PDF available here). That report suggested carriers could create competitive mobile e-mail service alternatives to then-leader BlackBerry, and go with less expensive, but still compelling, competitive models. Android wasn’t a factor at that time.
WDS’ Deluca-Smith tells RWW he believes carriers must adapt now to the new reality of the long tail, suggesting that at this point, the only ones who can resolve the rising costs of supporting Android are the ones doing the supporting.
“Android has done great things for the industry, even low-cost product,” he says. “However, carriers must be better at bringing the variety of Android builds onto their networks. Low cost has its place. It shouldn’t be used across all customer segments as a means to reducing subsidy costs.”
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Insurance keywords are the most searched for on Google, making insurance the most expensive category on Google AdWords and the top PPC money-maker for Google. Bidding on insurance keywords can cost advertisers up to $55 per click, according to a n…
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I’ve attended a lot of conferences in my day. I find them to be a great source for inspiration for new ways of thinking and new ways to tap into the industry community to grow my own knowledge. I had no idea, however, when I walked into the South-by-Southwest session, “It’s…
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