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PostHeaderIcon The Economics of Twitter for Advertisers, Part 2

Let’s continue our discussion of Twitter economics.

The average Twitterer has 549 followers.  Now this is skewed by corporate accounts (e.g. like our travel sites) and news sites that have a very large number of followers.  I have gone through a number of accounts to determine what seems like a realistic average number to use – and I am going to assume 200 followers.  Our experience is that for the first generation of followers, 10% pass along an offer (the theory of this is also quite enlightening but I will not cover it here).  For subsequent generations it is much lower, usually in the 2-5% range.  We mentioned previously that 15,000 is the average number of followers for the Big 3 sites (Expedia, Orbitz, Travelocity).  The calculation therefore looks something like the following:

15,000 (followers)

+ (15,000 * 200 *.1) = 300,000 (first generation pass along)

+ (300,000 * .02 * 200) = 1,200,000 (second generation pass  along)

= 1,515,000 (total number of individuals)

The number of impressions is then this base of 1,515,000 multiplied by the number of offers “seen”.  Expedia seems to be making offers every five minutes, as does Hotwire  (they must have set up some kind of automated feed into their Twitter accounts).  Travelocity and Orbitz seem to be making offers once a day (or even less).  The big unknown is how many offers does the average follower actually see?  They aren’t always online, or if online, they are doing other things and their attention is not focused on Twitter.  Or they are on Twitter, but the offer doesn’t register through the noise of all the other tweets.  Without any really good data, I will assume that each individual “sees” two offers/month – which I hope is a conservative number.

This means that the total number of impressions is: 1,515,000 * 24 = 36,360,000 per year

Given this number of impressions, what is the potential economic impact for Expedia, Orbitz, and Travelocity?  Typical conversion rates on these sites runs 3-5% according to various published data I have seen.  But, this is not a situation where someone has either typed in a keyword or clicked on an ad that appears when a keyword is typed in.  This is much more of a grazing situation.  Many offers are made, but only a few are relevant to any specific individual.  So the response rates look more like email, and yet they are even smaller.  Why?  Because while the first generation is signed up to receive notifications (parallel notion to an email, in this case), the second and third generation are not.  Our first benchmark is therefore an email conversion rate from the initial mailing – which is calculated as  follows (I am ignoring losses due to bad addresses, since that is not an issue for online accounts – although see below for a related issue of dormant accounts):

# of impressions * open rate * conversion rate

Typical average open rates for good emailings are 10-12%, and conversion rates vary but let’s assume 2%, which is a number that comes from my experience with emailings.  That would yield the equivalent of a .2% conversion rate for the first generation.  But for the second and third generations, the response would be substantially smaller, maybe .1% or even as low as .05%.  Since the first generation is such a small number of individuals, I will use .1% as the conversion rate for the entire base of impressions.

The last pieces of data we need are the number of tickets purchased, the number of purchases per individual in a year, and the average revenue to the travel agency from each ticket purchased.  Again, I am going to use data that is fairly well known in the travel business.  These are gross averages and do not take into account a number of variables, such as the type of travel (business vs. personal), destination (domestic vs.international), and type of flier (managed vs. unmanaged)

Number of trips per year: 2

Average number of tickets purchased/trip: 2.2

Avg revenue per ticket to agency: $25

So now let’s do the annual revenue calculation for the economic impact of Twitter for a large online travel agency:

36,360,000 * .001 *2 *2.2*25 = $3,999,600

 

For a big travel agencies, which have around $1B in annual revenue, this is small (.4% of revenue) but it isn’t chump change either. 

Before I close, one other issue needs to be explored – and that is the issue of dormant accounts.  The model presented assumes that every individual who is following or who receives a retweet or direct message is an “active” Twitter user.  But as we all know, many from our own experience, you may set up a Twitter account and then never go back to it.  Or you may visit it only rarely.  I call these dormant accounts.  There has been a lot written on this topic – just type “dormant twitter accounts” into Google.  Nicholas Carlson recently wrote a post for BusinessInsider.com titled “60% Of Twitter Users Quit After A Month“. Carlson cites Oprah (@oprah) as an example of someone who has become “bored” with Twitter and reports that Nielsen Online estimates that 60% of Twitter users quit after a month. The post goes on to say that the 60% number may be misleading as Nielson only measures Twitter usage based off Twitter.com and not from mobile use or apps like TweetDeck.  Given this data is pretty consistent with other social media sites, and the fact that a lot of tweets happen off of twitter.com, I think we can safely assume that the dormancy rate for Twitter is 50%.

In this case, our approximately $4mm in annual revenue has now become $2mm in annual revenue. 

Not huge, but I think we could say that the ROI on the costs associated with maintaining a corporate Twitter account for this purpose are probably pretty spectacular. 

I do not doubt that this post will cause a lot of discussion/controversy (at least I hope it will), and I look forward to all feedback. 

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PostHeaderIcon Communication in the Tweet of a Facebook – Who's Story?

I love to go back and read my old threads.  I always look at them and think, “Did I really write that?”  – sometimes meaning it in a good way, and sometimes in an unfavorable way.  Either way, the story I have told comes as a surprise to me.

Storytelling.  Surprise.  Those two go hand in hand – good stories pose questions at their beginning and follow with a series of other questions that need to be answered, ultimately reaching a conclusion with the last open question answered.  Great stories surprise us in the way they answer these questions.  If you think about stories that have been told to you (and I’m not talking only about those in written media), some have been boring (no surprise), some have left you wondering and/or feeling unfulfilled (don’t answer all the questions they pose).  But the stories we love to hear – and note that the main verb we use to describe how we interact with stories points to the dominant media, our voice, by which we told stories for the majority of human history – have something that captures you.  It could be drama, which is nothing more than posing questions and then keeping us waiting for their answer, or characters who surprise us by acting differently than we do or ideas that give us a new perspective (also surprise).  The impact of the story is even more potent if the storyteller happens to be a craftsman of the language who uses words and sentence structure like a great painter uses brushstroke and color. 

Think about it. You can have a great story using bland words and phrases.  The story still has drama and surprise.  You can have story where the writer paints complex and intense pictures in your mind’s eye, but that is boring or incomplete.  But when you have drama, surprise, and lustrous language – my God, then you have a story of which you never tire, which carries you along with it and away from your daily cares to places you have never been and may never go (or never want to go, in the case of a horror story), and that teaches you something about yourself, and the human condition, in the process.

There is a wonderful quote from Eric Hoffer that speaks to this 

Man is eminently a storyteller. His search for a purpose, a cause, an ideal, a mission and the like is largely a search for a plot and a pattern in the development of his life story — a story that is basically without meaning or pattern.  The fact of storytelling hints at a fundamental human unease, hints at human imperfection.  Where there is perfection there is no story to tell.

It is my personal and strongly held belief that the majority of human communication, but definitely not all,  is in the form of stories.  Questions like “What did you do today?” “or What are they saying about Kevin?”  or “What’s our vision for the next big thing in social media?”  or “What is our future military program for Afghanistan?” all have the potential to be answered as stories.  Those people who can make those stories memorable through clever turns of phase or image-laden language often become celebrities and get paid a great deal, whether it is only for their stories or the way they use the power of stories to bring people along towards a goal.  Think Carl Sagan and Charles Kerault , Barak Obama and Ronald Reagsan, Steve Jobs and Eric Schmidt.   

 So if we are storytellers in our DNA, then why oh why would we – to go back to the first question posed in my previous post – give up the bandwidth of storytelling for a 140-450 character limit of social networking sites?  It allows us to stay in touch with and aware of a wider number of friends, family, and acquaintances, true, but what good is that if I can’t express myself in a story format?

First, a 140 character format actually does allow some amount of storytelling.  For example, here is a real Facebook entry:  “Audrey is not looking forward to lugging 15 bags of salt out of the car. Why doesn’t the OSH man come home to unload too?”  There are story elements contained in this 129 character statement.  There is a question: Why is Audrey lugging 15 bags of salt?  That’s a lot of salt for this person who I know and have been tracking.  Do they have a water softener?  Is it snowing?  Have they suddenly become a mad scientist?  They are not earth shattering questions, nor do they tell us a lot about the human condition in general, but they do tell us something about a single person’s condition right now, someone we know and probably care about (in a good way).  Besides that, humans are naturally curious creatures, so any question put in front of me will cause me to at least want to find out more.  A 140 character message is like a Tarot card reading.  It provides part of a picture, enough to make us curious, but also enough to allow our imaginations to “fill in the blanks.” 

So on the surface, what social media is good for is status reporting.  Here is what I am doing or care about right now.  You can cover a lot of ground in 140 characters in that regard.  For many people, just knowing a bit about what many individuals they care about are doing is worth the tradeoff of bandwidth and length.  In our modern world, with our ability to move great distances quickly and settle far away from those we care about, the 140 character limit is an especially worthwhile tradeoff in order to “touch” them and know what is happening in their lives. 

But that doesn’t explain why we follow and interact with people nearby.  Admittedly in the manic, barely-managing-to-keep-up world we have created for ourselves, the only way I may be able to stay in touch, or want to stay in touch because I only have 5 seconds before I have to run off to take Johnny to school or Linda to ballet class, is through 140 characters.  In this case, 140 characters is a perfect mode of communication – perhaps the only one I have time to use so I use it.  But for either scenario (cared ones locally or at a distance) I could also pick up the phone, which has more bandwidth to tell a story, can be quicker, and can also occur while I’m in the car driving Linda to ballet class.  So why type 140 characters instead?

The answer is also storytelling.  With social media,  the difference is I get to participate and help create the story.  I also can focus on that part of the message, the specific question out of several that has made me curious, that I care about.  I can elicit a response to my curiosity and let the “Tarot card” in front of me answer back.  I can throw out my own question and see how “the story” (the storyteller) responds.  I can even add my personality and my character (both me as a person and the implications of me as a person) to the story.  Depending on how I answer, and how the original sender of the message responds back, I end up taking the story in a new direction.  When you add in the same for every other person who may be tracking the original sender, suddenly you have a rich fertile substrate for creating a story in the moment, about the moment.  In this case, the story is like a quilt where each person contributes a piece.   And to go back to the prior paragraph, a phone cannot easily provide multipoint, multiperson communication.

Here’s an example from yesterday from Hal Stern, my brother in arms from my days at Sun Microsystems (btw, one of smartest guys you’ll meet in high tech). 

 

Hal Stern's Thread on Facebook

 

Hal’s initial post meets the criteria I mentoned earlier – it poses all kinds of questions – and provides substrate for others to “fill in” where he leaves off.  Then look at Carrie Garlick’s post – it poses it’s own set of questions but also ads a touch of Connie’s personality, i.e. “personally I scream much more nasty things….”  So we have questions, and we learn something about the human condition of a small sample of sports fanatics – but not just any sports fanatics – MY friends who happen to be sport fanatics. Linda Hoffman has added a different element to the thread, so we begin to have the quilt of a story.

We’re staying in touch, and we’re telling a story.  Sort of.

And that ‘sort of” is why, to answer my second question, we see parodies of this no matter how much we find social media useful.  It isn’t a way of storytelling that we are used to.  It is “jerky”, with no real storyline and no clear obvious resolution of a last question.  It often stops after one or two comments, if there are any at all.  It is a vehicle for miscommunication as much as communication – i.e., is Carrie Garlick being funny or serious about screaming more nasty things?  It is noisy – meaning that even with limited bandwidth there are lots of random elements as well.  I may not care about Linda Sterling’s comment about The Power of One, but I still have to wade through her comment to get to Carrie’s. 

So we’ve made a Faustian bargain.  On the one hand, we get to know something  about  what is happening with more people right now and we get to participate in building a story through conversation.  On the other, social media has very serious limits to its effectiveness (e.g. the noise). The paradoists are pointing out that if we are willing to trade off time, bandwidth, and quality for 140 characters and immediacy, then why not take that knob and turn it all the way down – to a single character in a femtoblog?  The answer is that the suggestion is ludicrous, because then you lose all the bandwidth and there is no tradeoff between immediacy and richness. 

The question is “where do you set the dial?”  Right now, nobody knows the answer to that question, which is what is making a lot of us very nervous.

Oh, and btw, if you happen to find typos, it’s because writing this blog took me far too long, I’m running to get my daughter to gymnastics. Anyway, can’t talk now.  I’ll try and call you from the car.

The art of storytelling is reaching its end because the epic side of truth, wisdom, is dying out.

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PostHeaderIcon Communication in a Tweet of a Facebook – What's all the Flutter?

I love it when I’m in the middle of a long discussion about a subject and the world catches up with me.  Last post: what kind of communication are we creating in social media and its implications for us?  Today, along comes Flutter, a humorous take on the on-going shortening of communications online.  Where Twitter is microblogging, Flutter now creates a new category called nanoblogging, which limits all communications to 26 characters.

Now, I happen to find this paraody hilarious, but even as this was happening, my old buddy from Sun/JavaSoft, Miko Matsumura – the original Java evangelist, took reductio ad absurdem even further with the term femtoblogging, which is communicating in a single character.  While he did not define the vocabulary and grammar, I assume that ! becomes I, K becomes “I’m great” but k is a simple “I’m ok,” just to give a few examples.  Miko had 30 single character responses, all of which everyone else seemed to understand, so clearly a true language with semantics and syntax has developed.  (I am proud to say however, that my response was in full sentences and required people to actually read something – which means it was clearly out of step with current reality and no one read it. )

What femtoblogging reminds me of is the !Kung click language.  A click could be considered the equivalent of a single character in femtoblogging, but the San people who speak !Kung seem to understand it and communicate very effectively with it.  However, in click languages, clicks are more like ones and zeros – long strings of specific clicks accumulate to express complex ideas.  But that doesn’t take away the importance of the analogy.  Why would advanced civilizations with thousands of years of development of complex, deep, and profound written systems move to a form of society (socializing) which values shorter and shorter messages which by definition must contain less content?  There has to be some kind of trade-off – we have to get something in return for the “loss of signal” in our communications.  What tradeoff did the San people make and why are they still speaking a click language hundreds of years after being exposed to more robust and efficient oral communication tools (with an almost infinite combination of consonants and vowels)?

The tradeoff we make is twofold.  First, in a society where time is an increasingly valuable commodity (although that whole treadmill links to a topic for another day), learning to communicate quickly in short bursts about elements of one’s status – what I am doing and what I know or have discovered that may have use to you right now – is worth the reduction in signal volume.  The other tradeoff that makes bursty communication worthwhile is the ability to keep track of many more people over  a wider geographic range than we could previously.  So in a way, we are substituting volume for depth.  The bandwidth has not changed at all.  What has changed is that each communication requires less bandwidth and allows us to communicate with more people in parallel.

But that is a result, not a cause.  Why is communicating with more people in parallel, more immediately, of value?  I could understand that if we were talking about a marketplace or stock exchange where the freshness of information lasted only a few minutes or seconds and we needed to quickly communicate our “price” to a large number of people in real time.   But for more typical human interactions, communicating this way seems counterintuitive and ineffective.

The other question we should ask is why suddenly are these parodies of our technology arising on the same day?  Parodies evolve from real situations that have some element of the absurd in their nature which a comic can expose and explore.  They bring out something about a situation that is inherently uncomfortable for or inconsistent to us and cause us to not only look at what is making us uncomfortable but to also laugh at it. 

What oddity fundamental to the essence of  Twitter, Facebook, Flutter, and other similar sites  is making us uncomfortable, like a grain of sand in an oyster?  Why do we accept the implications of a world where communication is in short, bursty messages, and yet fear its consequences?

We’ll pick it up in the morning.

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PostHeaderIcon Communication in the Tweet of a Facebook (as captured on 12seconds)

Communication.  It’s something simple to understand.  There is a message, a sender of the message and a receiver of the message.  If the receiver receives the message the sender sends, that is a communication.  Communication is nothing more than the act of sending and recieving the message.  Nothing more, nothing less?

Well, let’s take some examples.  I am sending you a message:

2380 jsdaop oj sdoppojsd ppjpodsj. 

You just received the message (we hope).  Is that communication?  I certainly doubt you feel it is.  To you and me it’s a garbage string, has no meaning.  We’ve gone through the act of communicating (in a sense), but we have not communicated.

Let’s take another:

Ad praesens ova cras pullis sunt melior

More than likely you do not speak Latin.  So to you, I have not communicated very well.  You can hypothesize from the grammar and word combinations that it is a “true” communication of some kind, but in a language you don’t understand.  If you spoke Latin, you’d know that the phrase I just wrote is “Eggs today are better than chickens tomorrow.” And if I thought you knew Latin, then that would be all the message I did send.  But since you don’t speak Latin, you may feel I’m showing off and the message you received was “I’m superior to you because I can speak an ancient language and you cannot.”   (I certainly hope you don’t feel that – as I don’t really speak Latin, I used the Web).  But I didn’t even vaguely send a message like that – so where did the message you received come from? 

In this case, the message you “received” was an emergent property of the context of the communication.  The context was the medium of the communication, the situation in which it was sent, and the psychology of the receiver (what I like to call the “communication veil”).  I didn’t send anything vaguely resembling your message, but as my message moved through the communication veil, a substitution occurred in which a new message was created because you didn’t understand the original message, which I assumed you did, and you were therefore able to insert a new message into the “hole” that existed.  You knew I was trying to communicate something, but didn’t know what.  You also assumed I knew you didn’t know Latin.  Through your veil, I was therefore purposely being abstruse.  So you “filled in the gap” as it were with your best guess of what my implied message was.  Unfortunately for me, your best guess was not what I intended.

It often amazes me  given all the communication veils,  the unpredictable situations we experience daily, and our mediums that are both noisy and odd at times, that sender and receiver come even close to having a true meeting of the minds. 

So we now have a new medium – a social medium.  It can be written, photographic, audio only, or video and audio.   When it is written, it is between 140 characters (Twitter and SMS) and 450 characters (Facebook), with many sites/services limited to the 250 character level.   Photos usually extend to 4 or 5 in a short space (with the ability to click to a larger page) and audio/video have minimal limits (unless the site, like 12seconds, limits length). 

 Written communication in 140 characters?  What kind of communication is this?  Let’s look at some examples from Twitter:

 

FacebookSocial Create a profile for your Twitter account! http://bit.ly/4FJRcw

 The first is an ad – and may I add (no pun intended) that we are seeing Twitter become overwhelmed with advertisements now.  From my perspective, it is getting to the point where I cannot maintain any kind of “conversation” (back to that term shortly) flow with all the noise.  If something doesn’t happen to limit this, Twitter is quickly going to find itself obsoleted.

The second is a personal note.  The third is a share about something of interest to the sender.  The fourth and fifth are an information request I made about whether others were noticing trouble with Twitter and one person’s response

What can we say about these messages and communications in this medium? 

First:

The first three messages do not seem to request a response.  They appear to be monologues.  Are they?  Depends on the context of the receiver.  But what is unique about social media is just that fact: it makes no distinction from the sender’s or receivers’ (not the plural)  perspective.  Unless I do a direct message, I don’t necessarily expect or require a response.  I don’t even know who is listening, and I don’t care.  It’s as if I were in a cafe with hundreds of people all talking – some to themselves, and some to others – and I’m shouting a message that I hope, but can’t know, that anyone will really hear. 

The receiver’s pespective is similar but opposite.  I’m listening for specific messages among the noise.  I can tell when someone is talking to me (or even about me) because there are visual or other clues (e.g. the @sign) that allow the volume of those messages to raise above the din.  But there may be other interesting things these monologers are saying, so I can’t ignore the noise totally.  What I can do is filter the voices of only those I think I might care to hear.  This reduces the signal to noise ratio substantially, but doesn’t remove it altogether.  It may cause me to miss other messages of interest, as well.

As a receiver, I can chose to send a message back, but it is not required or expected.  That is very different from previous conversational media:  when a message was sent, a response was expected.  So, if there is a message sent and you can’t know if anyone hears it, are we really engaging in communication?  To a certain extent, this is the online version of a message in a bottle – only the ocean is filled with thousands of bottles.  Not only can I not know if someone will receive my message (even my followers), but with thousands of other messages out there, they may not be able to find it, even if they are looking for it.  Certainly as a sender I am trying to communicate, but on the surface it would appear an awfully inefficient and ineffective mechanism.  We’ll come back to this.

So what are the purposes of these communications?  Why send a message someone may receive but I can’t be sure and I can’t truly identify who will be the receiver?  We’ll also come back to that in a moment.

On the other hand, the fourth message requests a response – so it is a more traditional form of communication.  Its purpose is to get a broader perspective on an issue important to me.  I’m trying to confirm a fact or a situation and determine whether it is specific to me (a personal problem that I must take action to solve) or whether it impacts the whole community (in which case, others may be acting to solve the problem). It is also probably a timely issue, otherwise I would not necessarily send it via social media.  I say probably because that isn’t necessarily true.  Communication is about habits.  If I am in the habit of communicating mainly through social media, I may chose that as my medium, even though it may not be the most efficient.

The fifth message is a directed response to me.  It is very likely I will receive it, but not guaranteed (if I am away from my desk or phone).  But it is also sent to everyone listening, so the intent has to be to engage a broader group in the conversation.  So in that regard, it has the same basic properties as the first four messages.

Second:

What about the content of these communications?  Certainly, they are not rambly blogs on deep subjects that no one will ever read…. (I have no self-delusions on that subject).   They cannot and do not contain Ideas – even Matt Cutt’s entry doesn’t contain an Idea – it contains a pointer to something that to him contains an important Idea.  But isn’t Danny Sullivan’t comment about the Karate Kid an Idea?  Isn’t it expressing something unique?  The answer is it expresses a unique opinion, but it does not contain a new Idea – it is instead commenting on the validity of Ideas expressed in a longer and denser medium. 

You cannot express substantive thoughts – big Ideas – in 140 characters, and probably not in 450 characters.  And I am the first to say – and please hear me because I don’t want anyone thinking this is some kind of elitist claptrap – that most communication is NOT about big Ideas – otherwise we wouldn’t identify specialized subsets of humanity as visionaries, philosophers, or gurus.  The point is social media is not a vehicle, nor is it expected to be a vehicle for conceiving, developing, or communicating Ideas with a capital I.

So what about stories?  Storytelling is deeply ingrained and fundamental to human communication.  In fact, I would argue that most everything we try to communicate is done in the form of a story.  I used to love to say that as our ancestors used to sit around the campfire at night and listen to the shaman tell a story about the Gods, today we sit around the projector in a dark room listening to shamans tell us about the Gods of profit and technical wizardry. 

So does social media contain stories?

We’ll leave that to tomorrow’s entry.   

 

Tweet verus est rara avisA true Tweet is a rare bird

(OK, NOW I’m showing off)

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PostHeaderIcon Quick Thought from The Muse

Twitter:Facebook :: IM:Email

which scares me to death as a lover of the English language.  The more we get used to Twitter, the loss of deeper content across other parts of our written world will increase.

“Whan that Aprille with her shoures sote….Twitter comes to dash our houpes.

More later..

Actually I thought of a better way to adapt Chaucer’s Canterbury Tales:

“Whan that Aprille with his shoures sote. The Thoghtes of Twitter hath perced to the rote….”

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