When Ping was first released last year, very briefly, it was possible to connect your Facebook account to your Ping account to share your Ping activities or find new friends on Ping. This feature was pulled at the eleventh hour due to breakdown in negotiations between Facebook and Apple. Ping launched without support of a major social network to piggyback off of for friend recommendations. Sometime over the past year, and I'm not sure when as I only noticed it recently - which goes to show how often I use Ping, Twitter was added to Ping. Under your Ping account, it is now possible to connect Ping to Twitter to have it share your Ping purchases & likes. Clearly this would not have happened if Apple & Twitter had not formed some sort of relationship and began working together. This brings us to yesterday's announcements where Apple revealed that Twitter will now be deeply integrated into iOS 5. Twitter now sits on the main settings menu alongside items like Mail, Phone and Safari. On the details screen of the Twitter menu, users can log into their Twitter account directly or, if they don't have it, click a button and install Twitter's official Twitter client. That is huge. Apple clearly has doubled down on Twitter. They've integrated Twitter on various send menu's throughout iOS such as in the Camera app or Maps app. Notice they didn't even mention Facebook once during the whole keynote. To me, this sounds a lot like what happened when the original iPhone came out. Apple knew they needed a carrier to launch the iPhone on. They approached Verizon. Negotiations fell through. They turned and found AT&T more receptive and went with their second choice. Apple approached Facebook. Negotiations fell through. They turned to the second biggest social network and found Twitter more receptive and went with their second choice. The only part of the story we don't know yet is, will Facebook come crawling back to Apple in 3 years asking for equal treatment that Twitter got? Maybe. Maybe not. I'm not sure this is as an important issue as being able to carry a handset on your mobile network, but the whole situation just seemed oddly coincidental to me. I think if someone with proper sources could ever discover the details behind all of this, it would make for a good story.
So a company that owes $230 million more than it has, and appears to be burning through $100 million or more a quarter, is using money raised from later investors to pay back early investors? Sounds vaguely familiar. I'm not accusing Groupon of doing anything illegal or unethical. Ponzi, Enron, and Madoff all swindled their investors by misleading them about the financial health of their enterprises. As Minyanville's Todd Harrison likes to say, "The only difference between intervention and manipulation is communication." Groupon is telling you exactly what they are in their filing forms and by their actions. Invest at your own risk.
Groupon has filed its S-1 and hopes to raise $750M in its initial public offering. Given they’re currently losing a staggering $117M per quarter, despite revenues of $644M, they’ll be burning through that cash almost as soon as it hits their account. At the moment, it’s costing them $1.43 to make $1, and it doesn’t look like it’s getting any cheaper. They’re already projected to make close to three billion dollars in revenues this year. If you can’t figure out how to make money on three billion in revenue, when exactly will the profit magic be found? Ten billion? Fifty billion? My wife shops Groupon a lot. I do not. Partly because I feel I don't need to spend money on most of the things they offer and I know if I simply ignore Groupon, I will save money. I feel the bottom is going to drop out from under Groupon in a few years and everyone in the tech media will raise their hands and run around shouting about how no one saw this coming, how could this happen, etc. For the record, I saw it coming. ( 1:00 PM June 3, 2011 - for future reference)
The fragility of free is a catchy term that describes what happens when the free money runs out. Or — perhaps more accurately — when the investors/founders/venture capitalists run out of cash, or patience, or both. Because at some point Twitter and all other companies have to make the move from ‘charity’ to ‘business’ — or, put another way, they have to make the move from spending tons of money to making slightly more money than they spend. Kyle Baxter wrote a follow-up to Ben Brooks' article: Twitter’s value lies in it being a communication utility, where anyone and everyone can quickly communicate information. That’s incredibly powerful, and it simply couldn’t exist if it wasn’t a free service. This doesn’t mean the strategy Twitter pursued is correct; rather, it means their error was in being so cavalier about a business model. They assumed if they reached a critical mass of users, turning it into a profitable business would be easy—and they’ve discovered that isn’t really true. It takes just as much thinking as building the actual product does. Read the first article, and then the second one. Done? Good. You may now resume your normal #dickbar bitching.