22 Dec, 2009 – one comment

who owns your content’s profitability?

Yesterday’s surprising news that Twitter actually earned a buck in 2009 raises interesting questions about profitability, labor, and the gift economy.

As reported by Business Week,

Twitter is ending 2009 on a high note. The microblogging site has reached profitability after inking $25 million of deals that make its content searchable by Google (GOOG) and Microsoft (MSFT), Bloomberg BusinessWeek has learned. In October, Twitter said it had struck multiyear arrangements that make users’ short blog postings available on Google.com and on Bing, which is run by Microsoft.

In exchange for making short blogs, known as tweets, searchable on Google, Twitter will receive about $15 million, the two people say, adding that the Microsoft partnership is worth about $10 million. “The deals were huge,” says one. “With two scoops of the pen, a lot of revenue came in.”

The payments Google and Microsoft were willing to make to Twitter underscore the growing value of the massive volumes of data coursing through Twitter’s network. Executives of both companies have said their technologies would be considered incomplete if they did not include the millions of messages that get posted on Twitter every minute.

Microsoft and Google purchase the rights to publish our content. But we don’t get a cut of the profits.

Make sense to you?

Twitter’s terms of service clearly state, “You retain your rights to any Content you submit, post or display on or through the Services.” But then go on to say, “By submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed).”

So, we own our content, but Twitter can do pretty much whatever it likes with that content. Try thinking about this with a physical good – you own your car, but I can pretty much do whatever I want with it (demolition derby!). You own that pie, but I’m going to run it through my digestive system.

How’s this fair?

Well, as Josh pointed out to me yesterday, “Twitter let’s you use their service for free in exchange.”

But then Twitter would be worthless if I hadn’t used their service and brought my friends with me… right? And from the Business Week article, Twitter actually cut their operating costs by negotiating with mobile carriers because the size of their user base is now so large. So I doubly helped Twitter.

Right?

Well, isn’t this what Google did?

Yes and no. Google ‘crawled’ my content (on my own .com) and the content of millions of other people to better understand how it all fit together, and in turn, improved how search engines fundamentally find content. Google does display a brief snippet of my content to searchers, but it does not publish the content in its entirety. This new use of tweets will (perhaps simply because tweets are so short, anyway).

Welcome to the collision of the gift economy and the market economy (Adam Smith’s economy).

The market economy is structured in nearly immediate transactions of value – what I give is predicated on what I expect to get in return. Quid pro quo. The gift economy separates the input and output for the foreseeable future – I apply labor with the expectation that eventually, some day, I will be repaid. And that payment may come in social standing and not gold, women, or sheep.

Like you, I’ve tweeted for so long not in expectation of some financial reward, but with the hope/knowledge/expectation that someday my efforts would be repaid in connections, status, interests, and beautiful strangers.

But our belief in the gift economy can be unsettled when the market economy generates a sizable wealth from our donated behaviors. Imagine if the Blood Bank of America, an organization that has consistently run under the gift economy, began selling our blood to private enterprise (hey, that’s my B negative!).

One way to look at this is Generalized Exchange – that value is exchanged circularly and new types of value are created in the process – as Twitter gains profitability it can begin offering new services, new value, and as more users flock to the the platform they bring with them new value to Twitter.

But then again. $25 million. That’s a few jetpacks, right there.


One Comment

  1. Daniel Honigman
    Daniel Honigman December 22, 2009 at 10:14 am .

    I think $25m buys exactly 3.1 jetpacks.

    Great take on a fascinating story.

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