Twitter is to Facebook as Google was to Yahoo!
Similarities:
- Google took a core piece of Yahoo! page views (search) and made it a key, stand alone product and brand. I.e. Yahoo! had pageviews from movies, real estate, etc. and so viewed search as an add on. Turns out search was a key product in its own right. Similarly, Facebook pageviews seem to be driven in large part by photos and apps, with status messages a big chunk of page views but not something that has been focused on as a stand alone extensible product. Enter Twitter - with "extensible status" - which has been establishing itself as a standalone product/brand.
- Additional key insight David had: The piece of Yahoo's traffic that Google took over, was the most monetizable piece. Similarly, Twitter's extensibility of status messages will be more monetizable then the average Facebook page. Why? Because a subset of Twitter pages show direct intent to purchase something, as well as search on Twitter should be monetizable for a subset of terms.
Twitter will be the winner in social search
I know a number of people who have each launched a social recommendation product in the last few months. They are all really smart people who built nice products. However, I think for quick, real time responses Twitter is emerging as the winner in social search. People send out quick tweets to ask which restaurant to go to, what car their friends like, and what gift to give their significant other.
This real time web of communication tying into a broader use case (of regular, mostly mundane Tweets) is similar to Google vs vertical search engines. People use Google because they can find *anything* on it, so they also enter their commercial queries (which monetize best) into Google as well. People ask their friends for recommendations (which should monetize well) on Twitter because they are constantly broadcasting other stuff (which doesn't monetize so well - such as "I just ate stinky cheese. It made me feel funny".) on Twitter. By establishing a broad use case around real time communication, Twitter has also made itself the potential winner in social recommendations.
Why is Twitter the winner in this and not Facebook?
Facebook still has an opportunity to make a lot of money in this area. However the things that are likely to hold Facebook back are:
- The need to focus on the broader experience (i.e. how does status tie into everything else?) This prevents it from emerging as a stand alone app with a simple, clearly defined use case.
- Facebook has a ton of stuff on its plate (monetization, mobile, etc. are probably all sucking up resources). Twitter does one thing and does it really well.
- Facebook doesn't have real time communication feedback loops built in as tightly as Twitter.
Where the Twitter/Google Facebook/Yahoo analogy breaks down:
Size of outcome (Facebook is adding 5m people a week!)
Google is currently worth>5X Yahoo! by market cap (as of March 02 2009). Facebook is adding 5 million new users a week (i.e. the rough equivalent of a Twitter) and I think will be a very valuable, very large property. I do not think Twitter will be worth 5X more then Facebook in 3-4 years :)
Technology as key differentiator
One of the reasons people say Google went on to be more valuable then Yahoo! is on its focus technology. I.e. better technology led to lower costs (and higher margins) on the serving side and higher revenue on the ads targeting side (e.g. when to trigger good ads, which ads to show that will monetize best, etc.). In the case of FB vs Twitter, FB is known as the stronger technology company.
To sum up with one last commonlaity in Twitter/Facebook vs Google/Yahoo- both Twitter and Facebook will be enormously successful companies (people seem to forget Yahoo is worth >$15 billion and have 100s of millions of users worldwide).
8 comments:
great post elad. i agree with you.
2 comments:
a) twitter lacks the social graph/deep profile that FB has (that could change). A killer move by T is if they add a simple profile option (pics, etc.) which could be linked to in tweets.
b) unrelated, but what are ur thoughts on friendfeed. seems like they've becaome irrelevant, especially since FB stole their friendstream idea.
rami
Eh, I don't think the analogy adds up on several other points.
First, search was not simply one small, neglected part of the Yahoo empire. Search is where Yahoo started - at one time, Yahoo was only search. I would say Google's advantage came from better search technology (e.g. more relevant results) and the simplicity of their focus on search. Yahoo's home page became cluttered, while Google's sparse page appealed to users. Yahoo lost focus. Meanwhile, Facebook has never been simply about status updates, and I would say Facebook has not lost focus in the way Yahoo did.
Second, how can you say Twitter is taking over the most monetizable piece of Facebook's product? You offered social recommendations as a potential money-maker, but so far Twitter has not capitalized on that, and there's not definite signs it would be a good revenue stream for them. Most people watching Twitter are still wondering how they're going to monetize. Besides, I would imagine that "subset of Twitter pages [that] show direct intent to purchase something" are not a large chunk of the total. Meanwhile, Facebook is still struggling with monetization, but they have much more to work with than Twitter's smaller feature set.
Personally, when I saw this headline on Techmeme, my first thought was "linkbait"... and reading the post did not convince me otherwise. I just don't see how this analogy holds up. Besides, it's been my experience that Twitter and Facebook don't even directly compete in many ways. Not only does Facebook offer many services that don't compete with Twitter at all, many people use Twitter differently from their Facebook status updates.
@theharmonyguy: (thanks for the comment!)
Y! did indeed start as a browsable directory (as opposed to a search engine, although maybe this is semantics) but quickly shifted its focus to acquiring content in specific media verticals. Search was something it outsourced until it realized the value of search as proven by Google, hence its acquisitions of Inktomi et al. to supplement its search capabilities. So I think it is pretty clear that for many years Yahoo! did not think search was a cornerstone of its strategy. So Yahoo! did not lose focus, it actually kept focused on what it was - a media directory of content which increasingly pointed at its own content (so people wouldn't click off the site). AFAIK, Yahoo's homepage was more or less always pretty cluttered - after all, it was a directory service :)
Re: Google monetization vs. Twitter - Google's original monetization model was to get paid to provide search. They switched to ads (first AdWords and then AdSense) when they realized that this was too tiny a market. This was about 4 years into the life of Google as a company, and even now a small % of queries have been publically stated to drive the brunt of revenue. I am guessing this will be the same with Twitter - i.e. most tweets will monetize terribly. There is the additional hurdle that (a) Twitter would need to build technology to target the longer Tweets (vs the shorter search queries) and (b) there is an issue of user intent - are people tweeting for suggestion likely to click on ads? If the answer to (b) is "no" then this does not work.
Anyhow, just thought it was an interesting topic to think about.
@cloverfield_monster:
thanks for the comments. looks like FriendFeed is close to 1million uniques and growing:
http://siteanalytics.compete.com/friendfeed.com/?metric=uv
This is really good for a company that has had a live product ~1 year...
E,
One thing worth considering. Google didn't just bite off one part of Yahoo's business - they bit off something that was already fairly lucrative on its own but perhaps not as interesting / sexy as the display side of Yahoo! business. While Twitter could dominate the status update space, that's not something that's monetizing terribly well at the moment.
definitely a plausible theory, but by no means a sure bet.
twitter is a content-generation tool. content-generation tools come in waves.
some other waves you may remember:
- website builders (geocities/tripod/homestead)
- blogging tools (xanga/blogger/livejournal)
- video sharing (youtube et al)
usually, in such waves, the first mover(s) builds an early lead and cashes out, becoming a complementary business to a
large company like Google, HP, or Fox. the others fail, find a niche, or linger like lost souls.
who has benefited the most from these waves? search engines. why? because they enable intent-driven discovery of that content, which makes their traffic highly monetizable. by intent-driven, i mean in the sense that search tends to be driven by a specific desire ("where can i get a really good cheeseburger?") compared to say, browsing news headlines or RSS feeds.
Twitter, as the first mover in the microblogging wave, could cash out and be done with it. But to really be the Google to Facebook's Yahoo, they must provide the best tool for searching (and by extension monetizing) microblog content.
Twitter search is that tool today, simply because it's easy: a high percentage of microblogging is done on twitter, thus their comprehensiveness is high. But what if microblogging were to become more fragmented? What if instead of 80% of microblogs being written on Twitter, 40% were, and the rest were split between Facebook and a spate of others? The emergence of FriendFeed and Google's move to open Jaiku seem to point in this direction.
In a fragmented landscape, the qualities of the best microblog search engine are similar to those of the best plain old search engine: comprehensiveness, ranking, speed, and reliability. Twitter has proven well its deficiencies in reliability. Whether they can deliver in comprehensiveness (when a significant amount of content is hosted elsewhere), ranking, and speed has yet to be seen.
X-posted to my blog
@charles - I agree, Twitter would indeed need to monetize for the analogy to hold. In Japan Twitter shows ads (at least they used to - haven't checked this out in a while) while in the US they tried other models. Can Twitter build a great Tweet-monetizing ad server (or do they even want to?) - who knows?
Re: FB not monetizing status well, one can argue FB doesn't monetize anything superwell and this is something a large part of their eng team is now focused on. In addition, in order for status to monetize well (a) ads would need to be targeted specifically against status (as opposed to the million other things on FB) and (b) the targeted ads would need to get clicked on in context for the user posting the status (which also gets lost in the mixed for FB).
Maybe the Google/Y! analogy holds up even better given what you say. Twitter really needs to figure out how to monetize Tweets (like Google needed to figure out how to monetize search). In comparison, FB will be more focused on broadly monetizing all pages and take a very different tact (a la Yahoo! with display ads, which defocused it off of figuring out how to monetize what turns out to be a valuable business)
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