The buzz in the consumer internet right now is real-time. Twitter and Facebook have put the
spotlight on real-time but now tech giants like Google and Microsoft
are giving real-time the time of day.
Where is this all leading? Is real-time the most important thing taking
place on the internet today as some believe or is it the next overhyped
Last week, real-time was the subject at TechCrunch’s Real-Time CrunchUp event. In reading the notes from the various panels, I realized why real-time is largely a red herring. The reason: most of the interest in real-time is focused on the least interesting applications of real-time.
For those enamored by real-time and who think it’s the future of the web, it’s worth recognizing that real-time isn’t a new concept:
- Algorithmic trading systems that trade financial instruments in an automated fashion based on real-time market data have been employed in the financial sector for years and account for a significant amount of the volume on major exchanges.
- Farmers increasingly use sensor systems to collect real-time data related to land and crop conditions, driving ‘smarter‘ irrigation decisions faster and with less labor.
- Major companies in a number of industries have been adopting RFID to help increase supply chain efficiency.
- Some of the world’s largest oil companies use ‘intelligent fields‘ technology to track well and field production data in real-time.
The difference between these applications of real-time and real-time in the consumer internet, of course, is value. All of the applications listed above have a value that is easily converted into dollars and cents. Twitter et. al., not so much.
In the context of the consumer internet, real-time really hasn’t established a value beyond entertainment. Yes, despite the fact that Twitter, for instance, has been used to spread information about important events, the reality is that Twitter is still primarily an entertainment platform masquerading as a communications platform. If you’ve got more time than you know what to do with, it’s fun to consume the content stream on a service like Twitter. That content stream may be of use to you in some way but chances are that it isn’t going to help you make more money, create efficiencies, reduce labor, etc. In other words, the content is not actionable; it’s little more than a digital diversion.
There’s nothing wrong with that. Entertainment is big business too. The challenge in turning the entertainment value of real-time in the consumer internet, however, is finding a viable business model. Despite the potential many see in real-time search, for instance, I think Rupert Murdoch has good reason to question whether Twitter can make the type of money some are betting it will.
One of those betting on Twitter and real-time consumer internet startups in general is prolific angel investor Ron Conway. He suggests 10 ways to monetize real-time in the consumer internet. Read the list — not a single one is even marginally original and despite the fact that all of them are familiar business models being used in other markets today, nobody is anywhere close to generating the $5bn Conway believes these monetization strategies can produce in the real-time market. Reality speaks for itself.
To show you why the focus on real-time in the context of the consumer internet is so misplaced, let’s take a look at one of the business models Conway suggests that could alone be worth billions: advertising (surprise surprise).
Even though Google has an interest in real-time search, the reality is that the success of Google’s gold mine, AdWords, is largely driven by the intent inherent in traditional search. If I’m looking to purchase a lawnmower, for example, it’s relatively easy for an advertiser to use AdWords to reach me.
With real-time, intent isn’t necessarily present. Perhaps more importantly, real-time search is fleeting; as opposed to traditional search in which an advertiser can reasonably predict how many relevant searches will be performed on a daily basis, real-time search queries are typically driven by the topic du jour.
The day after a hot new consumer electronics product is released, real-time search queries might be related to keywords relevant to the product; the day after a famous celebrity dies, real-time search queries are more likely to be related to keywords relevant to the celebrity. In both cases, advertisers have no predictability as to whether real-time search will deliver an audience or not; much of the time their ads may get no play whatsoever. And if they aren’t prepared and constantly monitoring trends themselves, they may not be able to react fast enough to the fluid nature of real-time search queries to maximize opportunity.
To demonstrate this, let’s take the keyword ‘auto insurance‘. On Google, there are plenty of advertisers spending big bucks trying to reach potential customers using this phrase:
According to Google’s keyword tool, there were over 37m searches in June for ‘auto insurance‘. And millions more if you include related phrases such as ‘auto insurance quotes‘. A healthy chunk of the people doing these searches are likely to be in some phase of the auto insurance purchasing process. That makes buying AdWords ads for the phrase ‘auto insurance‘ an appealing proposition for auto insurance companies.
A search for auto insurance on Twitter is a tad different:
Clearly, there’s not a whole lot of valuable real-time content relating to ‘auto insurance‘ being produced on Twitter, and there probably aren’t a whole lot of searches either. More importantly, if you ignore the fact that the page seen above is on Twitter (eg. one of the hottest sites on the internet), would you classify this page as having content that is highly contextually relevant to ‘auto insurance‘? Put another way, if you were going to develop a content-rich page about ‘auto insurance‘ for the purpose of displaying contextual ads, would it look like this? Didn’t think so.
At the end of the day, real-time in the consumer internet is a red herring.
The real money in real-time lies in applications in which all of the data points being monitored are known to be of value and in which real-time data can be analyzed on the fly to produce actionable business intelligence. The financial markets, the farm, the supply chain, the oil patch. Not the chatter on Twitter.
This doesn’t mean that there isn’t any opportunity for consumer internet real-time. But let’s finally call it what it is: a user-generated content play. Nothing more, nothing less.
Photo credit: nDevilTV via Flickr.