January 26, 2014 7:08 pm

Technology: turning data into dollars

US dollar bill and binary code©Getty

Buckup: Facebook and Twitter could make more of their userbase

The phrase “you are the product” has become a cliché when we talk about many of the big technology companies. When you think about it, however, many of the web-based giants do in fact have products they offer you – often in return for metrics rather than actual money.

Google’s product line-up is diverse, occasionally flaky and largely focused on gathering user data against which to serve you relevant adverts. It has both physical and virtual products: its keenly priced and well-liked Nexus hardware range aims to lock you into its world so that you will see as many ads as possible when you use its services. I think of Android as a giant metrics-gathering, ad-serving ecosystem spread across a number of hardware devices made for Google and those from original equipment manufacturers, most notably Samsung.

That is why Google is happy to give you free products – email, storage space, maps, documents and online collaboration services – in return for the information about where you are, what you are searching for, who you are with, what you are reading and what you are discussing with your friends.

Google does sell enterprise services – the FT is one of several UK newspapers to use Gmail, for example – but its revenue from those services is reckoned to be in the region of $1bn for 2013, which is peanuts when you consider that its earnings for the third quarter alone were $14.89bn.

That number is also why it is happy to sell its own-brand hardware at very competitive prices: the new 16GB Nexus 7, for example, retails at £199 in the UK, compared with £319 for Apple’s similarly equipped iPad Mini with Retina display.

Facebook similarly exists mostly to sell advertising, gleaning its information about what adverts to show you via your interaction with your friends, with the brands you Like, with the places you check in. Facebook’s only other consumer product is its limp Gifts service, which is available only to buyers in the US (though users elsewhere can buy gifts such as Starbucks tokens for their friends in the US).

Like Google, Facebook does not break down its revenue streams, but its third-quarter filings do say that of its $2.02bn revenues, just $218m was contributed by payments and other fees; the rest was from advertising.

And what about Twitter, which in November launched an initial public offering at $26 a share? Shares in the microblogging service have risen above $50, which many think is mad given the company’s slow user growth and apparent lack of monetisation strategy other than advertising. Twitter has eight revenue streams, seven of them from advertising. Only the revenue from its data licensing arm, which allows analytics companies access to its data, is less to do with advertising, although it nonetheless relies on the company’s user base.

Amazon, by contrast, exists to sell you stuff. The original product was books, but it now sells a huge variety of things, from home products and clothing to books and even sex toys.

That stuff is not Amazon’s only product, however. Of all the web companies, it is probably the one with the widest range of products. Not only can you buy any physical product you may need or want but you can also pay for website hosting and other cloud computing services – and of course, you can purchase a Kindle.

The Kindle is not only a Trojan horse designed to get you to buy digital content (which we older types sometimes refer to as “books” or “magazines”); it is also Amazon’s answer to Google’s Nexus devices, to lock you into its ecosystem.

On top of all that physical and virtual product, Amazon is working on placing its Lovefilm movie rental service on smart television sets and, reportedly, is developing an Amazon phone, which presumably will run the same “forked” version of Android (without the Google services such as Maps and the Play app store) as the Kindle Fire.

What this tells me is that too many big technology companies are far too dependent on advertising and, by extension, on their user bases. Facebook may have more than 1bn users, but it has been leaking young users to ad hoc peer-to-peer networks provided by apps such as WhatsApp, BBM, Snapchat and Kik.

Twitter’s user base is much smaller than Facebook’s, with 230m active users, and it is a much less sticky platform than Facebook – meaning there is much less to keep a user on the site and seeing adverts.

I am by no means predicting the demise of either. Facebook in particular benefits from sheer weight of numbers: it acts as a pretty good registry of people and it is the first place you go when you are looking for an old colleague, lover, schoolmate or to find someone you met recently and want to stay in touch with. Yet both Facebook and Twitter would benefit from finding new products to engage their audience and stop it drifting away.

For Facebook, one option is payments. You can organise events and promote your brand quite effectively on the platform, but when it comes to paying for something, the consumer goes elsewhere and Facebook fails to grab a slice of the revenues it might have helped generate for that brand.

What if, instead of bouncing off to Eventbrite, a ticket-selling website, a fan wanting to see a band could buy a ticket straight off the event’s Facebook page? Alternatively, having Liked Mulberry’s latest £1,000 handbag, a customer could click a buy button on Mulberry’s brand page, with Facebook receiving a percentage for handling the payment.

Much of the work has already been done: retailers’ websites are sprinkled with Facebook “like” buttons – the data are already shared. Teaming up with an existing payments provider to set up a mechanism for transactions would seem to be a no-brainer.

Would that make Facebook more of a marketplace – like, say Amazon, which strides the retail scene like a colossus, as small technology companies walk about under its giant legs?

Yes, eventually. All the big web companies rely to some extent on turning consumers into products, but Amazon and Google have built stronger foundations by selling products to those consumers. Twitter and Facebook could learn lessons from them.

The write stuff: apps to boost your productivity or while away the minutes

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WriteRoom

iOS (free)

WriteRoom is a clutter- and distraction-free app to get you to focus on writing rather than faffing about with formatting. Having said that, you can still waste time by fiddling with the font, line-spacing and colours options. The app adds a row of keys above the letters, providing quick access to the most used punctuation marks, and you can add others, up to a total of nine. Dropbox users can sync documents to that service, otherwise the only way to get copy out of the app is to email it. Another irritation is the lack of a running word count. It is free at the moment while bugs are ironed out, but I am not sure I would pay $5 for a glorified note-taking application, but then I would only write something longer than an email on my iPad if I were desperate.

Cal

Android, iOS (free)

I tried this calendar app on both iOS and Android, where they are puzzlingly different. The default view on my Android Nexus 10 is a minimalist month view, while on the iPhone you just get the week. Add an event and a venue, and the app makes a decent stab at working out the location, then offers to plan a route there. Android users can choose between Apple Maps, Google Maps and Waze. Android offers to order a car to your event from taxi service Uber, while iOS users must make their own arrangements. Both offer photo themes, though neither gives you the option to use your own images on the device. Cal could be a good calendar replacement if it had some rough edges smoothed out and let you use your own photos.

Frax HD

iOS, £2.49

The developer’s website describes fractal geometry in some detail and if you are not mathematically inclined, it will make your head hurt. But no matter: the app itself is wonderful. It generates real-time immersive fractals that you can play with. There is also a gallery of fractals already generated both by the creators of the app and in the Frax community, or give the app access to your photo gallery and let it create gorgeously psychedelic versions from there. The app pushes the Pro upgrade, but if you just want to marvel at the swirling results in between doing something more productive, the basic app is fine. If you come up with something beautiful, the developer will do a high-res render in return for credits bought in-app.

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