By now, everyone has read up on the Twitter IPO, it’s 73% pop, compared it against Facebook’s botched IPO, and tried to use this valuation as how much each Twitter user is worth. After today’s trading, Twitter’s stock should stabilize on a price range where it will trade until we start seeing the impact the holidays have on Twitter ad sales and how/when Twitter can turn a profit.
It’s interesting that days after receiving a patent infringement letter from IBM for 3 patents, Twitter’s stock rose so high above initial valuations on the same day that the Senate held a hearing on patent trolls. Doubtful that there was any major correlation on Thursday, but when the legislation does go to vote, we could be looking at the biggest implications for the tech industry since SOPA and PROTECT IP.
The fervor with which patent battles are fought is nothing new and equally matches the intensity of the copyright and trademark issues that kicked off the SOPA and PROTECT IP battle in 2011–2012. Protecting intellectual property and content to this extent is all about money. But when it comes down to the individual level on social media, content is not considered intellectual property and is often perceived as hold zero worth. In a more traditional paradigm such as television, you can clearly see the value of the content to advertisers through the costs of production. The viewers are what advertisers are after, but they will only be there if they watch the show, hence the desire for the show to be as good as possible. The trade off in seeing ads is that viewers will watch a show they like with the end result being a win-win for everyone involved — the audience, content creators, content providers (TV stations, cable providers, etc.), and advertisers.
The Audience as Content Creators
Social media should be looked at through this same lens. If the content isn’t there, then the audience won’t be either. The big difference is that in social media, the audience members are also the content creators — we create tweets, photographs, check–ins, etc. and they are what drive us to use the platforms themselves. The failed attempt of Facebook/Instagram to sell users’ photos for ads without their consent, further shows the quality and value of the content that’s created. This is a different spin on the value of social content to the audience also seen in Google’s new policy of using product recommendations in ads. Advertisers find additional value in targeting, but without the audience doubling as the content creators on social media, content providers like Facebook and Twitter would not have content or audiences.
Through Adwords and Youtube ad partnerships, Google leads in allowing users to make money off of their intellectual property (content), and others such as stock photography company Fotolia are joining in. It will be interesting to see if Google starts finding ways to pay G+ users if their recommendation leads to a sale/conversion, but that will probably hinge on the outcome of the attempts by the New York Attorney General, Yelp, and others to cut down on fake reviews and the pay-per-review industry.
A the end of the day, investors and advertisers want to make a profit and not all of them are fully convinced that social media networks can be profitable despite their huge user–bases and information they provide. Social media companies must recognize and respect the audience as content creators and find a way to nurture this relationship. The same goes for users who need to be conscious of what they post and why — perhaps it lies in Farmville subsidies and paying people not to post things. Otherwise, as shareholders demand increased ad revenues through more frequent and larger ads that feel more invasive of privacy, and users find it harder to get to content they care about, social media networks will see audiences, content, and revenues spiraling down.