Slowing Down the Stream to Grow Faster

One of the primary challenges that Twitter needs to overcome to make this transition will be to develop a broader-based audience. Six years into its existence Twitter has reached 140 million users. But compare with Facebook which hit 500 million active users in the same time frame and Instagram, which will most likely pass 140 million downloads by the end of this year if they continue on their current growth trajectory- a mere 2 years into its own existence. So why hasn’t Twitter, which has similar brand recognition as Facebook and exceeds that of Instagram experienced similar growth? It boils down to simplicity and relevance. Facebook started out by focusing on photo-sharing and communication on the web while Instagram took photo-sharing to a new level in mobile. Both services were built in a manner that makes it easy for users to find and consume individual posts by highlighting the most relevant content in their feed based on their social graph’s interactions with it. Twitter on the other hand has always been about real-time distribution with little framework around how to use it, making it intimidating and not intuitive for newer, mainstream users. If Twitter hopes to reach 2 billion users it will need to focus less on what has made it popular to date (the real-time nature of the platform) and more on how the rest of the world consumes content (at their leisure). The new weekly digest feature, combined with the launch of the Discovery tab on Twitter’s apps at the beginning of the month should go far in simplifying the on-boarding process for new users by making the entire content experience more digestible.

The Reality of Real-Time Monetization

At the same time, Twitter needs to solve how best to monetize the real-time web experience beyond Promoted Tweets. For all the interest and excitement around real-time feeds, except for a few situations, no one has yet to prove there is a business model that can be built around it. Finance is the only traditional industry that operates in real-time to begin with, so companies like Stocktwits are in the enviable position of having already built their business around capturing the stream of stock market commentary on Twitter and providing additional analytics and services around that information that professional investors are actually willing to pay for.

The one area where Twitter seems to have identified opportunity around monetizing real-time communication is live events such as sports and award shows. The most popular events on Twitter, in terms of concurrent volume of tweets, have been sports-related, the Champions League soccer semi-final followed by the Super Bowl from this year, which had the highest tweets per second volume of any topic ever discussed on Twitter. The partnership announcement between Twitter and ESPN last week to create interactive programming around major sporting events is the first attempt to monetize this highly engaged audience on Twitter through advertising. Combined with the announcement the following day with NASCAR to curate tweets from a variety of sources around specific race events, you can see how Twitter could build a real-time business around curating the second-screen media experience.

Beyond these examples, all the other information being tweeted (except for natural or social emergencies like earthquakes and riots which cannot be monetized anytime) doesn’t require real-time distribution to be effective. The killing of Osama Bin Laden? The passing of Beastie Boy Adam Yauch? Great information to have, but isn’t any more critical or particularly more valuable when provided in real-time nor can it really be monetized appropriately. So by slowing down the stream experience, Twitter might actually be able to increase their monetization options beyond their current offering.

Continuing to Evolve Through Acquisition

Twitter’s broadening platform capabilities have benefited greatly from  acquisitions. The weekly digest looks like it is leveraging Twitter’s acquisitions of both Summify (a provider of daily summaries of the most relevant news from social networks) at the beginning of the year and RestEngine (a personalized email marketing service) earlier this month. For Twitter to continue down this path as a media broadcast network, additional acquisitions will be likely. While the biggest headlines Twitter has made on the acquisition front recently have been for the latest photo-sharing app it didn’t buy, the company should look at Pocket (formerly Read it Later) on the consumer side that allows users to save content for consumption at a later time- a sort of DVR for the real-time tweet stream- as an example of potential add-on services for its platform. On the business side, enhancing its analytics offering to compliment the tools and services it already provides to media publishers and advertisers should be Twitter’s primary focus.

From Content Carrier, to Curator, to Creator?

Ultimately, the type of broadcast network Twitter decides to evolve into will depend on whether or not the company gets into content creation. A recent job posting by Twitter aimed at journalists seems to indicate just that and may expand on the previously announced ESPN and NASCAR relationships. Luckily the evolution from carrier to curator to eventually a creator of content isn’t without precedent. Comcast was a carried content over its broadband networks until it decided to buy NBC a couple years back (after an unsuccessful attempt to acquire The Walt Disney Company years ago) to get into the curation and creation businesses. And as Matthew Ingram from GigaOM pointed out, YouTube has undergone the same progression with the announcement last fall of a $100 million fund via Google to invest in online content creators.

With each new step Twitter takes in its evolution as a broadcast network, the company exposes itself to greater business risks, but also greater financial rewards, by owning and further streamlining the process of getting content in front of consumers. Finding the intersection that optimizes the content consumption experience for users with Twitter’s own platform strengths and capabilities should be the main focus for the company going forward. If Twitter can find that optimal mix, it can become the internet’s answer to traditional media broadcasting.

By applying the same underlying technologies that power RTB, a new class of ad inventory has emerged that exists between traditional direct-sold (tier 1) and remnant (tier 2) inventory that is being referred to, conveniently enough, as tier 1.5 inventory that might be able to bring together the best of both inventory worlds. In a traditional RTB environment, ad inventory from one publisher to the next becomes indiscernible outside of pricing, removing the contextual relevance of each ad impression in the process. Even if you incorporate audience data for targeting specific web visitors, without knowing the context or even website that will be surrounding the ad prior to bidding on the impression, campaign performance, and thus publisher CPMs, will remain poor. It will be the ability to automate the entire process of targeting the right user on the appropriate website alongside relevant content that will improve the fortunes for all parties involved.

That’s where private exchanges come into play. They bring the efficiencies of RTB into an environment where advertisers know the context of where their ads will be delivered and publishers can set parameters as to which advertisers can have access to their audience and at what prices. Entities like quadrantONE for local news in the U.S. and the just announced pact between three of Canada’s largest broadcast companies are taking this one step further by pooling impression inventory from multiple online publishers across the same content types to provide a larger audience pool for advertisers to target in hopes of garnering larger portions of ad budgets. Layered on top of this, semantic technologies from the likes of Crystal Semantics, Peer39 and Proximic, can be leveraged as part of the set-up and bidding process within private exchanges to better organize content into categories in an effort to complete the contextual picture for the available ad inventory.

Instead of relying on advertisers coming into their web environments, others like the New York Times are looking at new ways to expose their content for monetization by leveraging social media. The company recently announced the release of Ricochet from their R&D Ventures group, which allows advertisers to wrap their ads around relevant articles from any Times Co. publication that these brands can then distribute across social media channels to interested fans and followers.

All of these opportunities don’t mean that publishers can get away with just enabling technologies for ad buyers at the transaction level in hopes of improving their indirect revenues though. In addition to building audiences through more engaging content, there are a number of services being brought to market by start-ups at the user interaction level that can help drive a better web experience, which can translate into more ad revenues. Companies like Visual Revenue are helping online publishers determine what content to highlight on their homepages through predictive analytics, while Sailthru’s Concierge provides content recommendations to keep users engaged once they are on the site. Finally, Yieldbot is attempting to tie all this activity together into the appropriate context for advertisers to target users on an impression or even session basis to create an on-going advertising experience.

In society, a growing middle class is beneficial to the overall health of the economy. The same can be said for online advertising where the rise of middle class ad inventory will benefit the entire online ad ecosystem. This doesn’t mean that tier 1.5 inventory will be a panacea for all remnant inventory nor will it replace direct sales relationships. Instead it will offer buyers and sellers more choice around how inventory is bought at scale thanks to the ad standards developed over the years by the IAB. There will always be a need for full service ad sales teams that can create a native advertising experience that guarantees audiences for those advertisers willing to pay for better access and services. It’s those companies that figure out the right experience for their site and users and can optimize revenues across these 3 tiers of ad inventory that will be able to gain the advantage in a still nascent ad market.

Photo image source: Time Inc.

Facebook was a child of the now officially-ended Web 2.0 era, so its website was built to be experienced on personal computers. Now thanks to smartphones an app economy has emerged that has enabled companies like Instagram to optimize the user experience of their applications solely for mobile phones. Alongside the acqui-hire of the team from mobile messaging app Beluga last year (which subsequently built Facebook’s Messenger app) Facebook now has apps that bring the company’s core features from facebook.com, photo-sharing and communications, to a complementary set of stand-alone mobile user experiences.

These acquisitions don’t solve all of Facebook’s mobile needs though. Since Facebook Messenger and Instagram, as well as Facebook’s own apps, are built specifically for smartphone operating systems half of the mobile subscribers in the U.S., and an even a greater percentage in the largest European Union countries, can’t access these apps because they don’t own smartphones. Even with sales expected to cross 1 billion devices worldwide in 2014, smartphone penetration will still only reach 15% of mobile users, meaning Facebook can’t rely on smartphones reaching a tipping point in the near-term to address the risk factors associated with its growing mobile audience.

As Facebook reaches market saturation in many developed countries, the company will need to rely on emerging markets for the majority of its future growth from a user acquisition, and eventually, a monetization standpoint, as the primary means of accessing the internet in countries such as Brazil, India and Russia will continue to be through mobile devices. That means creating mobile experiences that are ubiquitous across devices and not tied to any specific operating systems is paramount for Facebook to scale its mobile offering. The Instagram deal notwithstanding, Facebook has spent the past year putting the pieces into place to address the other half of the mobile landscape.

Starting in March 2011 Facebook acquired Snaptu, a provider of smartphone-like usability on feature phones for an estimated $60 to $70 million to expand the capabilities of Facebook for Every Phone. Then in October the company announced the release of its mobile app platform that enables social discovery of HTML5 and native apps. Facebook followed this up with the acqui-hire of the team from HTML5 app platform Strobe and the hiring of a head of Mobile Developer Relations from Strobe competitor Sencha in November. Since then Facebook has continued to support the launch of their mobile platform with a series of mobile hack days and the open-sourcing of their browser test suite, Ringmark, for building apps on the mobile web. With 1 billion HML5-capable phones expected to be sold in 2013 the open, mobile web will be just as important as native smartphone apps to Facebook’s success.

With Facebook’s IPO now expected to take place a month from now on the heels of a booming advertising business, the company is well positioned to support a $100 billion valuation. But for Facebook’s stock to continue to perform well one of the key non-financial metrics investors will focus on is active user growth. As the company’s mobile user penetration trends past 50% of its overall user base towards 100% due to increasing smartphone adoption and emerging market user growth, extending the Facebook platform capabilities in mobile will allow the company to create natural revenue extensions in mobile for both its advertising (like the recently announced Reach Generator) and payments businesses that leverage both apps and the mobile web. But with international representing a growing portion of Facebook’s revenue mix, developing an ecosystem around the mobile web will be especially important for the company to continue to drive engagement and revenues.

If Facebook can execute on the assets they have put in place now, the company can turn the most over-analyzed aspect of its S-1 registration statement into its biggest growth story. In the process Facebook just might be able to answer the question- who’s going to be the Facebook of mobile- with itself.

Photo image source: Johan Larsson on Flickr

Let me know what you think and how I can improve the presentation for future use.

Path 2.0 incorporates a set of activities- Photos, People, Places, Music, Thoughts and Sleep/Awake status- that users can post to their timeline and share with their network. By initially focusing on these social services, Path’s mobile functionality either super-sets (in the case of Places and Thoughts) or competes with (for Photos and Music) some of the most popular mobile apps available:

• Photos: The basis for the original Path app, Photos, which incorporates image-filters as well, competes with many other photo-sharing apps including the wildly successful Instagram.
• Places: Popularized by location-based social networks, Path also offers check-in services inside its app and allows the location data to be posted to a user’s Foursquare account.
• Music: Giving users the ability to insert song clips into their Path timeline competes directly with the relatively new but popular SoundTracking app.
• Thoughts: Like any social network, commenting is a core functionality which Path supports and allows to be shared to both a user’s Facebook and Twitter accounts.

By leveraging design, for which the company has received rave reviews, Path has created a differentiated mobile user experience that consolidates these services into a single app. While competition between content creators and aggregators for audience attention is a relatively new phenomenon in mobile, it has played out over several cycles on the wired web already. Yahoo became a very popular web 1.0 destination by providing an online directory through which the initial content creators on the web could be found. Over time Yahoo evolved from being just an aggregator to a creator of content as well- launching successful finance and sports content verticals in the process. As the web matured, traditional media (magazines, newspapers and television networks) began bringing its offline content online, shifting consumer attention back towards these properties. Then came Google who re-aggregated the content experience for audiences by providing a better way to discover exactly what people were looking for through its search engine. Google has also tried leveraging its audience by acquiring (i.e. YouTube) or launching (i.e. Gmail) content and services that keep these consumers engaged with Google’s properties. When web 2.0 came along the balance of attention started to shift to socially oriented sites like MySpace and Photobucket where the users became the content creators. As last week’s S-1 filing reminds us, Facebook won the battle for social networking supremacy as they created a platform that not only aggregates individual content creation but enables professional content to be curated in the same experience as well. In the process Facebook took the aggregation idea one step further than in previous cycles by allowing other companies (such as Zynga) to build applications directly on the platform, thus ensuring users continued to engage with Facebook.

The ushering in of the mobile app economy by Apple has led to the development of hundreds of thousands of task-specific apps- from games and content apps to personal utilities and social networking services. Relatively few of these though have been built to aggregate individual app experiences. Path is attempting to do this, and take it a step further at the same time, by creating its own set of services (Photos, Music, Sleep/Awake status) alongside super-setting such well-established apps as Facebook, Foursquare, Twitter and now Nike+ through the use of APIs. A consistent, mobile-only experience throughout Path’s app allows users to still participate in these underlying networks but aggregates the engagement within its own app, which if successful, would allow Path to eventually drop their connection to these underlying social networks.

How valuable consumers find the aggregated experience versus using activity-specific apps will determine Path’s success ultimately. And while design may very well continue to win over users from competing web and mobile services, Path will need to grow beyond the Valley’s A-List of users and connect with the average American already using Facebook if it’s going to win the first wave of mobile app aggregation. If not, which companies stand to benefit in this cycle?

The Nielsen Company is the de facto provider of the ratings system used to determine how the 60 billion in television advertising dollars are allocated amongst broadcast and cable network line-ups. The company relies on the behavior of 50,000 Americans across its sample of 25,000 households to extrapolate ratings for the nearly 115 million households with television sets in the U.S.  The resulting ‘share’ of audience Nielsen attributes to each TV episode on a nightly basis ultimately effects which series get renewed or cancelled (for a great primer on how Nielsen’s TV ratings system works, check out this ESPN-style animated video on the topic from local Washington, DC creative agency JESS3).

Though with the number of households with television sets dropping for the first time in 20 years, on-demand video platforms taking viewing time away from traditional television and multi-tasking across multiple screens a growing reality, traditional means of measurement are failing to capture this evolving consumer behavior. While Nielsen is working on ways to aggregate this distributed viewing audience through its ‘extended screen’ initiative, the company isn’t measuring the actual activity on the social web occurring around the episodes being watched. This represents an opportunity for services that provide a platform for social engagement as well as companies that aggregate TV show-related conversations from across the internet to address this information gap. While both Facebook and Twitter have their own media-related initiatives that allow fans to interact with one another as well as with the shows and their stars, neither network focuses on quantifying this engagement on an industry-wide basis.

Services like BuddyTV, GetGlue, Miso and Tunerfish, on the other hand, have been built in a manner that can address this need. Having ridden the check-in wave popularized by location-based service Foursquare, these event-based social networks (EBSNs) capture when consumers are tuning in to watch television and aggregating the activity being generated around each show within their respective apps and websites. GetGlue, the largest of these services, already has more users checking-in to the most popular shows on its platform than the size of Nielsen’s entire sample audience, making it statistically valuable to the ratings conversation.

Even though the demographic make-up of EBSN users is not representative of the overall U.S. population (which Nielsen does try to mirror in selecting its households), check-in services make up for this by highlighting the actual activity of the most desirable audience to advertisers (18 to 49 year-olds) and not just projections. For advertisers this represents a unique opportunity to target these consumers in a highly engaged environment by extending their TV advertising for particular shows to the equivalent social web channels and mobile devices. To bring the desired scale to this type of opportunity though, these social environments need to be aggregated somehow.

That’s where companies like Bluefin Labs, General Sentiment, Social Guide and Trendrr come into play by not only aggregating publicly available social commentary but filtering and normalizing this data from disparate sources (EBSNs, Facebook, Twitter, etc.) to identify the underlying sentiment of a broader range of web users. This provides a more complete view of the engagement associated with shows across the social web in real-time as well as beyond the initial airing time slot of each episode. The resulting findings might be just the data set necessary to become the de facto social television rating to rival Nielsen.

Even with Nielsen’s recent ratings calculation glitch, it’s unlikely that the company will be replaced as the ratings system for the television advertisers industry in the near future. But as audiences for traditional TV continue to disperse across more mediums and content experiences, the need to compliment the ratings discussion, and ultimately how advertising dollars are allocated, with additional data will only continue to increase. This creates an opportunity for actual engagement-related metrics to gain equal footing with passive stream and tune-in projections over time.

So how do we get there?

While results from a recent NM Incite (a Nielsen/McKinsey company) study confirms the correlation between social activity and TV ratings, the opportunity for social television start-ups is in identifying and explaining the variations in popularity between Nielsen’s most highly rated shows and those series being discussed online and how to benefit from it.

The combination of tune-in and conversation activity make EBSNs the most compelling data set for social television ratings. The challenge is that the company that popularized the check-in, Foursquare, only recently passed 10 million users worldwide itself, a far cry from Facebook’s 150 million users in the U.S. alone. For EBSNs to reach Facebook-like adoption, they need distribution and a more automated process for socializing around TV shows (beyond the manual download of apps and checking-in to services). While BuddyTV and Miso have partnered with AT&T’s television service offering U-verse, GetGlue and Miso have integrations underway with satellite television provider DirecTV that enables subscribers to check-in to shows through DirecTV’s remote control. Other companies, such as Dijit, are by-passing traditional TV service providers entirely and competing for consumers with their own universal remote that layers in check-in functionality.

What social analytic companies lacks in proprietary data, they make-up for in business model by already working with advertisers and media companies to help them understand the volume and sentiment of chatter occurring online about their brands and shows across the social web. Gaining access to data on an exclusive basis from EBSNs and other social communities would be a key differentiator in winning the battle for advertising and media clients- the same companies that subscribe to Nielsen’s television ratings data. With so many companies vying for client dollars and mind share, the social analytics provider that can get the right media outlets partnerships to adopt and distribute their version of social television ratings can become the industry standard through sheer perception and market momentum.

Based on these factors, Trendrr, which launched a TV industry-specific real-time dashboard before the start of the fall television season could be that company. Considering Trendrr’s breadth of data sources (Facebook, GetGlue, Miso and Twitter) and how well they’ve embedded themselves into the online media landscape (partnering with the likes of AdAge, Lost Remote and Mashable to distribute their data and findings), the company is best positioned to become the social television ratings provider of the future.

What are the most likely outcomes?

Absent Trendrr or another one of these start-ups gaining the necessary client or user clout to grow into the de facto social TV ratings provider, the most likely outcome for the companies with the most traction in this market is an acquisition.

If either Facebook or Twitter decided to focus on providing analytics as a value-add to their advertiser and media clients, they would make ideal acquirers of these types of companies. For Facebook, adding a media-oriented check-in service to their massive user base would fit nicely with Facebook’s recent overturns towards the television industry and turn the acquired ESBN into the immediate and undisputed winner in the social television data game. Twitter on the other hand would benefit from acquiring one of the leading social analytics companies, as it would fill a large analytics hole in their offering. Even though the company recently stated its intentions to stay out of the enterprise market, the opportunity might prove to be too lucrative to stay out.

Beyond Twitter, The Nielsen Company is a natural acquirer of a social analytics company since it compliments Nielsen’s existing ratings and research business. With the company having held an initial public offering at the beginning of this year, Nielsen also has the necessary capital to do this.

Beyond these entities, media companies and television platform could benefit from owning one of the EBSNs by leveraging these services to gain insight into user activity and drive additional tune-in for themselves or partners. Yahoo was the first to act on this, acquiring 12-week old IntoNow earlier this year and releasing an iPad app last week that integrates into Yahoo’s Connected TV framework. For GetGlue and Miso, who have raised capital from Time Warner and Google’s venture arm respectively, they already have likely acquirers in the fold. That being said, with the variety of relationships GetGlue (most recently with FX) and Miso (most recently with Showtime) have established with different broadcast and cable networks it’s not out of the question that one of these media partners tries to acquire either company to be their underlying social TV platform. The engagement data would be very valuable to any company negotiating with advertisers during the ‘upfront’ season as a way to justify advertising rates (beyond Nielsen’s rating data) for the next television season or provide brands with a new way to advertise to their intended audiences (for an additional cost or as a make-good).

Stay tuned. This market will only get more interesting.

The result? Contests, giveaways and promotions of all types are requiring ‘Liking’ the company as part of the entry process. So what began as an opportunity for brands and fans to find and connect with one another in a social setting has turned into a competition between entities to see who can compile the most Likes in a 24-hour period. So thank you Frito-Lay, you’ve helped turn social into a transaction.

The socialization of the web was the most important development to come out of the web 2.0 era. The advent of blogging platforms and social networks allowed the internet to evolve from a read-only medium to a read/write experience for consumers who quickly became comfortable with blogging, posting and tweeting about every topic imaginable in the process. Inevitably some of these conversations turned to discussing experiences with, and opinions about, products and services, which corporations were not prepared to deal with, since advertising had traditionally been broadcast through a channel that didn’t allow for real-time user feedback.

To justify the time and money being allocated to understanding and managing this social activity, corporate departments, along with their agencies and social media consultants tasked with this job, have turned to quantitative measures such as number of friends, followers, Likes and subscribers as a way to validate their respective effectiveness in addressing the social web. As a consequence, advertising across social environments has quickly become a $2 billion business according to local media advisory firm BIA/Kelsey, which also forecasts that social media-related spending will grow to $8.3 billion in the U.S. by 2015.

The problem with this approach, as Steve Rubel, SVP of Digital at public relations firm Edelman, pointed out at The Next Web Conference earlier this year, is that social isn’t an industry, it’s a behavior. So instead addressing consumers at a personal level, web users are being treated as a metric by advertisers looking to fill their social media quotas. The difficulty for most companies in trying to adopt a customer service-oriented approach to social is that they don’t know how to quantify the return on investment for this type of activity (if you are interested in understanding the right approach to communicating with consumers on the social web I’d suggest reading The Thank You Economy, the most recent book from author, video blogger and wine enthusiast Gary Vaynerchuck, or watch him speak, as I recently had a chance to, about the ROI of his mother).

Worse yet, from an advertising perspective, these user metrics can be easily inflated, as there are plenty of companies that can acquire social connections in bulk for brands to show high Like counts. With the amount of time being spent by consumers in their Facebook News Feed, the ability to re-message these fans and the viral potential of content distribution through the social graph the Like has started replacing email as the most desirable means of communicating with potential consumers. Combined with low open rates, spam filters and unsubscribing options in email, the Like also become more valuable to marketers, leading to pricing of up to $1 per Like from social ad networks.

Buying Likes is the wrong means to building relationships with consumers though, as it is akin to offering kids on the playground gum to be your friend- it makes you feel good about yourself at that particular moment but doesn’t actually change the dynamic of the relationship. Certain users will use the Like button because they generally appreciate the brand, while others will use it in order to receive discounts and promotions, so paying for these types of fans doesn’t make sense, and in the long-term, could end up damaging the relationship between brands and consumers on Facebook.

Many consumers migrated from their initial ISP email accounts because of email spam resulting from signing-up for free services or giveaways, rendering these accounts unusable. By cluttering users’ News Feeds companies risks annoying consumers in the same manner and potentially causing users to leave Facebook over time for newer, less spammy social networks.

So where are the investment opportunities in social?

While Likes are a form of social currency, the business models being built around driving social connections are highly questionable. That’s because the continued growth and success of companies providing social cost per action pricing is predicated on finding the next great social action to arbitrage before advertisers lose interest in paying for Likes because of the lack of quantifiable return on investment.

Salesforce’s acquisition of Radian6 for $340 million earlier this year, to tackle social CRM, does highlight the value of being able to decipher the conversations occurring across the social web. Beyond just monitoring consumer chatter, start-ups need to help brands understand the sentiment of these conversations (both positive and negative), the change in velocity of the discussion associated with the sentiment and the influencers behind these topics. Only then can start-ups provide real value by automating some of the activity around information gathering and distribution across social platforms.

A couple of companies with recent announcements are trying to address this need for clients on the advertising and distribution side of the market as well. Taykey, which just came out of stealth mode with its $9 million Series B announcement, provides advertisers with ways to reach audiences across the social web in real-time by identifying users who are displaying an active interest around a product, service or topic at any given time. SocialFlow, which recently hired an online industry-veteran as President after raising $7 million in April, focuses on solutions for publishers and media companies who want to increase engagement with their audiences by putting new content in front of consumers at the appropriate time.

The automation being provided by these types of companies is intended to deliver better value to consumers and not de-humanize the social experience on the web (which is a risk for Taykey since they do provide cost per action Likes as part of their offering). Since the Like is here to stay, my only hope is that advertisers and consumers both engage with the button at the right time, and for the right reason- like in this ad.

• Overnight, Uber, a provider of high-quality, on-demand car service officially announced the availability of is service in a second city- New York.
• Then Gigwalk, which turns iPhone users into an instance mobile workforce announced that it had exited its beta period and raised $1.7 million in seed money in the process from an all-star list of early-stage investors.
• Finally TaskRabbit, which offers a marketplace for people to outsource their errands announced its own $5 million Series A funding round to help expand its service beyond Boston and San Francisco.

Each of these companies is attempting to apply the same concept behind peer-to-peer computing projects, such as the search for alien life forms, in utilizing available bandwidth. But instead of leveraging unused computing power, these start-ups are leveraging excess capacity in service-oriented businesses. For any type of service business, time not allocated or used to generate revenues are opportunities that are lost forever, just like when an airplane takes off with empty seats on it. In the case of Uber, the company is trying to alleviate this problem by matching professionally licensed drivers who have idle time while at work with new, short-term, fare opportunities. Meanwhile Gigwalk is pairing people with availability in a specific location with large corporations that need specific, once again short-term, tasks completed in that area. In the case of TaskRabbit, it’s allowing consumers who have free time on their hands to run errands on behalf of other consumers who don’t.

The opportunity to provide a service and generate revenues in a given period of time isn’t limited to these types of jobs though as other capacity-based service industries are benefiting from real-time yield maximization as well. Daily deal service LivingSocial has already tested its Instant Deals in D.C. offering lunch at participating restaurants for $1.00, while industry leader Groupon is developing a similar service called Groupon Now that enables restaurants, spas, and other retailers to drive business to their establishments through the use of real-time incentives. This makes perfect sense when these service businesses are not operating at full capacity. Taking the same concept of driving utilization through discounts, Hotel Tonight has launched a mobile app for booking same-day hotel rooms in a number of cities across the U.S.

The underlying enabler of all of these start-up services is the smartphone. Without the ability for consumers and service providers to communicate in real-time based on one or both parties’ location and availability, the opportunity to match the two entities wouldn’t exist. This would leave service providers without a way to generate additional revenues or complete certain projects in real-time and consumers without a way to benefit financially- either through service discounts or by generating additional income for themselves. The economic potential for retail and capacity-based services will only grow as smartphones and tablets become more ubiquitous and enable new business opportunities and economics to be created around simple, short-term, service-oriented tasks.

I’m excited to see what other service industries (airlines, data collection in the real world, movie theaters, tourist attractions, etc.) will benefit from start-ups that can help bridge the gap between existing sales opportunities and maximizing a service providers revenue potential by creating what are essentially real-time exchanges for specific services. For established service industries, there will always be a market for start-ups that can bring new revenue opportunities to the table. For entities willing to pay consumers to perform services on their behalf, the key will be to make the task short and easy to complete to attract the widest applicant pool for these jobs.

With the Android-based Motorola Bionic delayed until the second half of the year and rumors of the iPhone 5 shipping anywhere between September and the next year, the immediate decision seems to come down to whether I should get the 4G LTE network-enabled HTC Thunderbolt or iPhone 4. But is this the real question I should be asking myself?

The speed of Android’s rise to prominence in the U.S. smartphone market has been nothing short of amazing, growing from a 9% market share in February 2010 to 33% in February 2011, vaulting Android’s operating system from 4^th to 1^st place in the process according to comScore. Over that same period of time Apple’s U.S. smartphone market share has stayed flat at 25%. This had led to people like venture capitalist Fred Wilson of Union Square Ventures to suggest that developers should build for the Android operating system first.

What Fred’s analysis, this market share data and my question fail to address though is the broader market dynamics of mobile. The battle everyone is focusing on is Android versus iOS smartphones- and why not? With 70% of the U.S. still using feature phones, according to the same comScore data, the market opportunity for smartphones remains massive. Even so, the war between Apple and Google is actually taking place at a much broader level, as decisions made by consumers like myself and developers alike will decide who the eventual market leader will be for the entire mobile operating system (OS) market- not just smartphones.

While Android might be winning the smartphone market share battle, it’s at the mobile OS level that iOS holds the advantage over Android. Google’s primary market for distributing its mobile OS is the smartphone via HTC, Motorola, Samsung and other handset manufacturers. Apple on the other hand distributes iOS across three markets through its own devices- handheld entertainment devices (via the iPod Touch), smartphones (iPhone) and tablets (iPad). Because of this Apple’s outlook is much broader in scope- to get its other iOS devices into the hands of the 80% of the market (70% of the feature phone users in the U.S. plus the 1/3^rd of the smartphone market not on Android or Apple smartphone) not using an Android or iOS smartphone. By getting consumers to purchase an iPad or iPod Touch, Apple can create a barrier to entry for Google through high switching costs.

With every app install, especially paid ones and those that can be used across device types, consumers increase their switching costs for leaving Apple’s ecosystem. So when the time comes for iPad and iPod owners to upgrade their mobile phones, the iPhone is the natural choice since these users are already familiar with Apple’s App Store and iOS user experience. With the iPod’s market share pegged at 70% of the digital music market last year according to NPD and iPad’s at 85% of the tablet market in 2010 according to ABI Research, Apple has a huge advantage over Google in getting consumers onto its mobile OS platform through these types of devices. As iPod sales begin to decline though, the growth in iPad sales will be the key complimentary product in Apple’s effort to gain market share in the smartphone market.

According to a different study released by comScore earlier this week, there is evidence to corroborate iOS’ network effect for Apple in the U.S. iOS’ reach is 59% greater than that of Android when you combine iPad, iPhone and iPod users. This translates into approximately 38 million iOS users overall in the U.S. versus nearly 24 million Android users. More importantly though, in looking at iPad sales specifically, BlackBerry users account for the second highest percentage of iPad owners, behind iPhone customers, followed closely by Samsung and LG. This represents a great opportunity for Apple to convert these users into iPhone customers once their contracts are up or they ready to switch to an advanced smartphone. Update: comScore just released a similar study for the European market showing Apple’s reach being 116% greater than Android in France, Germany, Italy Spain and the UK- albeit on a smaller user base (29 million consumers) than in the U.S. As it relates to iPad adoption, Nokia users closely follow iPhone users in iPad ownership, providing Apple with a huge opportunity to take market share from the largest mobile handset manufacturer in the world.

So how can Android better compete with iOS at the mobile OS level?

• First, Google needs to nail down agreements with the music industry’s four main record labels in order to launch its cloud-based music competitor to iTunes. This will allow manufacturers to create devices that can finally compete with the iPod and eliminate the biggest feature advantage of the iOS platform.

• Second, Android tablets need to be synched with the smartphone’s OS platform. The Motorola XOOM, which launched with much fanfare towards the end of February as the first real competitive threat to the iPad (after winning Best of Show at CES in January), seems to have come up short. Sales of the tablet have been estimated at 100,000 devices in its first 5 weeks on the market compared to the iPad which sold 300,000 devices its very first day and nearly 5 million devices in the just announced second quarter. By running a newer and completely different version of Android than its smartphone siblings (Honeycomb 3.0 versus Android 2.0 thru 2.3.3) the device hasn’t been able to leverage apps from the smartphone Android Marketplace. According to Apple’s COO Tim Cook a fragmented ecosystem where Android tablets have less than 100 apps to choose from while iPad customers have 65,000. Without a cohesive OS platform across device types, Android will lack the switching costs afforded to Apple’s OS ecosystem.

For developers, the 189 million cumulative iOS devices sold through the end of March 2011 represents a huge market opportunity. Add in ease of monetization and payment mechanisms in addition to a formal app discovery process that is still lacking in Android’s marketplace, you can see why companies like Color and Instagram chose to launch in the iOS App Store first and why there continues to be more apps available for iOS than Android even though Apple has a more stringent app vetting process.

As for myself, the decision was easy once I took a step back and looked at the broader mobile OS ecosystem options. Even though I already owned an iPod Touch, I’ve decided to go with iOS primarily because I was planning on picking up a new iPad in the first place. So by default, the iPhone it is for me. With three different types of devices being tied to iOS when it’s all said and done I will be Apple’s ideal customer. The only question I have left? Do I wait for the white iPhone.

This is essentially the game Apple is playing in the tablet market right now. The company, which launched the industry with the unveiling of the iPad last April, has yet to see a truly competitive offering after selling 15 million iPad units in 2010. The only notable rival last year was Samsung’s Galaxy Tab. This Android-based tablet, which launched in November at a slightly lower price point than the iPad but at the expense of comparable features (smaller touchscreen display and less internal memory though it does include front and rear-facing cameras), has not met sales expectations.

The Motorola Xoom, which gets released today, is expected to be the first viable alternative to the iPad after winning Best of Show at CES in January. This device comes equipped with Android’s tablet-specific Honeycomb operating system and hardware specs to match current versions of the iPad, with the addition of memory expansion capabilities and front and rear-facing cameras, but accomplishes this at the expense of price (higher compared to iPads) and app offering (a handful versus the iPad’s 60,000).

In both of these instances, a trade-off between product and price had to be made by the manufacturer. To compete on price, Samsung had to sacrifice on product (i.e. screen size and memory). To compete on product, Motorola had to give on price (i.e. be more expensive). Throw in research that shows the iPad has 90% awareness among consumers, and you can see why tablet manufacturers must beat Apple on both product and price to beat the iPad.

Heads Apple wins, tails tablet manufacturers lose.

While Apple competitors might be able to match, or even exceed the design and hardware capabilities of the iPad at some point in the future, doing so at a lower price point would be challenging. Apple understands their strategic price advantage and is continuously looking to expand on it.

Case in point- based on iSuppli’s research, the single most expensive component in the iPad’s manufacturing process is the touchscreen display. So it’s no surprise that Apple revealed on its most recent earnings call that it has made long-term financial commitments of $3.9 billion dollars with three suppliers believed to be display providers. If correct, this means Apple would control 60% of the global touch panel capacity according to Taiwanese industry website DigitTimes. Controlling this amount of supply would have two major effects on the tablet market as (1) it would lock in favorable pricing and predictable supply for Apple going forward in manufacturing future versions of the iPad and (2) create supply constraints and pricing pressure on tablet manufacturers.

Once again, heads Apple wins, tails tablet manufacturers lose.

The concept of vertical integration is nothing new to Apple which acquired Intrinsity last year, a semiconductor chip design firm responsible for developing the iPad’s original A4 processor, in an effort to bring the skills and development costs in-house. This became another component cost advantage over the Motorola Xoom which leverages NVIDIA’s Tegra 2 for its processor.

With Apple’s event next week expected to showcase the next iteration of the iPad, which should once again place the product’s feature set ahead of its competitors, the question to Android, Tablet OS and WebOS tablet makers is: want to flip again?

Photo credit: Algie Moncrief/Flickr