Twitter CEO Evan Williams has indicated that Twitter will start making money in the first quarter of 2008.

The Silicon Alley Insider reports that Twitter has no intentions of raising further capital in 2009 and is in talks with ‘large consumer packaged good companies’ about its business model.

While we don’t know WHAT Twitter’s business model will be, Mr Williams has revealed some changes that Twitter has in the works.

Among other things, Twitter will allow Twitter friends to form groups for easier following, and will also make the micro-blogging service easier to use.

Fewer site outages would be nice too…

Source: Eric Krangel, “Twitter: Secret Business Model On Track For Q1”, Silicon Alley Insider, December 3, 2008

Despite originally planning to release version 2 of its Kindle ebook reader in October (in time for the holiday season), Amazon now plans to launch Kindle 2 in the first quarter of 2009.

According to TechCrunch, that may be too late. Michael Arrington reports that a number of new ebook readers are about to be released, some of which may pose significant competition to Amazon.

Source: Michael Arrington, “Amazon Kindle 2 Slated For Early Q1″, November 25, 2008

Prices for display ads sold through networks have dropped for the second quarter in a row, dipping below $0.30 on average, according to PubMatic.

Data from PubMatic’s AdPrice index indicates that the average effective cost-per-thousand impressions (CPM) for display ads has declined to $0.27 - down by 27 percent from the average CPM in the first quarter of 2008.

Ad network CPM rates seem to have dropped across the board. CPMs on news sites dropped by 36 percent to $0.36, while those on entertainment sites dropped by 27 percent to $0.33, gaming sites dropped by 26 percent to $0.48, CPMs on business and finance declined by 22 percent to $0.86, and CPMs on social networks declined by 22 percent to $0.21.

Small websites continue to command higher than average ad network rates, with sites attracting less than one million page views per month charging an average CPM of $0.61. However, this average CPM also reflects a decline – of 29 percent – since the first quarter.

According to Zachary Rodgers, writing in The ClickZ Network, the fall in CPM prices is the result of a number of factors, including “the glut of social network ad inventory, the rise of vertical ad networks, and doubts about the branding effectiveness of traditional IAB standard ad formats.”

He also notes that the changes may also be due to PubMatic using more accurate price data!

Source: Zachary Rodgers, “Ad Network Display Prices Continue to Fall”, The ClickZ Network, October 15, 2008

In the wake of the credit crunch gripping the world, peer-to-peer lending startups are displaying signs of trouble.

Developed to broker lending between regular people like you and I, such companies as Prosper, Lending Club, Zopa and Loanio were on track to broker around $150 million in loans in 2008, 50 percent more than in 2007. But while some considered peer-to-peer lending to prosper in the current economic climate, it appears this nascent industry is not immune from the financial crisis after all.

According to The New York Times, Prosper, the largest peer-to-peer lending site in the U.S., recently stopped allowing lenders to make new loans. Apparently it’s waiting for the Securities and Exchange Commission to evaluate its regulatory filings. This follows a decline in monthly loan volumes that began in the first quarter.

Since Prosper has never been profitable – it’s lifeline being $40 million in venture capital - its future remains uncertain. Meanwhile, another peer-to-peer lender, Zopa, shut down its U.S. website due to “extremely difficult consumer credit circumstances.” It’s still operating in Britain, Italy and Japan.

Source: Brad Stone, “Lending Alternative Hits Hurdle”, The New York Times, October 15, 2008

According to the MoneyTree Report released by PricewaterhouseCoopers and the National Venture Capital Association last week, United States venture capital funding declined 7 percent between the second and third quarters of 2008.

U.S. venture capitalists invested $7.7 billion in 1,033 deals in the last quarter, with 14 percent more funding going to clean energy companies, 10 percent more going to biotech and medical device companies, and 36 percent LESS going to Internet companies, compared with second quarter funding.

According to analysts behind the report, the numbers do NOT reflect the economic crisis. Apparently this has not yet manifested itself in lower VC funding. The third quarter of the year is generally slower for venture investing, and the reason why web companies attracted less funding is because
they generally require less investment, being relatively capital efficient.

However, there are ominous signs that startups will start to feel the pinch. The number of startups getting investment for the first time dropped by 20 percent to 259 in the last quarter - the lowest level since the first quarter of 2004.

Source: Claire Cain Miller, “Venture Capital Investment Down 7 Percent in Third Quarter”, The New York Times, October 18, 2008

ClickZ reports that research by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers reveals a decline in the growth rate of online advertising expenditure.

In the first half of 2008, $11.5 billion was spent on online ads. While this constitutes an increase of over 15 percent over the same period in 2007, it’s much lower than the 37 percent increase in the first half of 2006 compared with 2005.

Also, while online ad spending in the second quarter of 2008 was 13 percent the second quarter of 2007, it was 0.3 percent lower than what it was in the first quarter of this year. In other words, online ad growth looks to be dipping.

Nevertheless, online spending was still significant in the first half of the year. Search engine ad spending (about 44 percent of all online ad spending) grew to $5.1 billion, up 24 percent over the initial half of 2007, while display spending (33 percent of all online ad spending) rose by 19 percent to $3.8 billion in the first half of this year.

Most display spending was devoted to banner ads (21 percent). The remainder was devoted to rich media (7 percent), video (3 percent) and sponsorships (2 percent). Meanwhile, spending on online classifieds decreased from 17 percent to 14 percent in the first half of the year and lead generation ad spending dropped from 8 percent to 7 percent of budgets. Email remained steady at 2 percent of online ad spending.

Finally, advertisers continue to embrace performance-based ad models. Performance-based ads, such as cost-per-click or cost-per-acquisition ads were up for 52 percent of ad spending in the first six months of this year, up from 50 percent in the first half of 2007. Meanwhile, CPM-based ad spending dropped slightly from 45 percent to 44 percent.

Source: Kate Kaye, “Online Ad Growth Declines in First Half 2008″, The ClickZ Network, October 7, 2008

Amid the talk of mobile-phone enabled social networks, a mobile-ONLY social network in Japan has not only become hugely popular in that country, but has listed on the Tokyo stock exchange and raked in $46 million in sales in the first quarter of 2008.

Mobage-Town, a mobile SNS/virtual world/gaming platform launched by Japanese company DeNa, enables its 11 million members to send messages, chat in communities, exchange music, read pocket novels, write blogs, and more. It’s main attraction appears to be a large selection of free games.

Mobage-Town allows members to choose avatars who live in virtual rooms. Mobage-Town members can dress up their avatars and rooms by buying “Moba Gold”, clicking on ads, signing up for affiliate services or inviting new members… all of which directly or indirectly allow Mobage-Town to earn revenue.

Whether or not a mobile-only social network like this will work in other parts of the world remains to be seen. And some of us may see soon enough - DeNA has opened a U.S. office in San Mateo and plans to offer an English version of Mobage-town this autumn.

Source: Serkan Toto, “Mobage-town: Japan’s Biggest Mobile-Only Social Network”, Tech Crunch, August 16, 2008

David Rodnitzky makes a good point in the Search Marketing Standard. If the recession starts to bite online publishers reliant on advertising revenues, maybe, just maybe, Google won’t be able to be so picky when it comes to favoring some advertisers over others.

Online advertising has continued to grow, especially as more money has been taken out of off-line budgets and into what is unquestionably a medium that continues to attract more and more consumers. However, the economic downturn occurring in the United States, the United Kingdom and elsewhere means that marketers will have less money to spend overall, resulting in slower growth in online advertising expenditure.

Google, although continuing to perform strongly, missed Wall Street’s first quarter forecasts and is not immune to the effects of slower growth in ad spends.

So… in an effort to save revenues, will it drop its Quality Score standard?

Google’s Quality Score standard was introduced in 2006 to help ensure that landing pages for Google Adwords ads were relevant to the ads being displayed. Advertisers that Google regarded as having landing pages that were NOT sufficiently related to their ads were penalized with substantially higher bid prices - the idea being to deter such companies from running such campaigns.

Mr Rodnitzky points out that it’s all very well for Google to deter “low quality” advertisers when there are plenty of other advertisers willing to replace them. But what if the number of other advertisers starts to wane?

What if falling or stagnating Google Adwords revenues mean that Google will continue missing forecasts UNLESS it attracts more advertisers… such as those companies running lower quality ads that Google previously spurned?

I doubt that Google is anywhere close to relaxing its quality score for now… and it would be loathe to do an “about face” on this… but time - and the economic downturn - will tell…

Source: David Rodnitzky, “Is Quality Score Recession-Proof?”, Search Marketing Standard, July 21, 2008

A number of retailers — including Gap, Victoria’s Secret and J.C. Penney — are finding that while sales in their “bricks and mortar” stores have sharply declined… their website sales have increased just as, if not more, dramatically.

For example, while J.C. Penny experienced a 7.4 percent decrease in sales at stores open at least a year i.e. “same-store sales” (the usual measure of retail performance) web sales increased by 8.7 percent in the first quarter of this year.

While same-store sales at Victoria’s Secret dropped by 9 percent in Q1, the company’s catalog and Internet sales increased by 11 percent.

And over at Gap, while same-store sales decreased by 11 percent in the first quarter, online sales jumped by 21 percent in the same period.

Pure-play ecommerce stores are also benefiting from what The New York Times believes is a surge in ecommerce due to higher gas prices and other off-line transaction costs. Visitors to web coupon sites - sites that give customers discount coupons for shopping at various etailers - have increased by 21 percent over the past financial year to June 2008.

Meanwhile, Forrester Research predicts Internet sales to increase from $175 billion in 2007 to exceed $200 billion in 2008.

Source: Stephanie Rosenbloom, “To Save Gas, Shoppers Stay Home and Click”, July 19, 2008

According to the “Q2 Bellwether” report, released on Tuesday by the U.K. based Institute of Practitioners in Advertising (IPA) and Market Economics, growth in U.K. online ad spending grew just 6 percent over the first quarter of 2008.

This is the slackest rate of growth since 2003, and much lower than the 21 percent growth in the previous quarter.

Tougher economic conditions seem to be taking their toll on U.K. Internet marketing expenditure. Of the 250 companies surveyed for the report, only 19 percent increased their online budgets during the second quarter, compared with 27 percent in Q1. Furthermore, 12 percent decreased their budgets in Q2, compared with just 5 percent in the preceding quarter.

Online ad spending is expected to remain constrained throughout the remainder of the year.

Source: Jack Marshall, “U.K. Online Ad Spending Slows”, The Clickz Network, July 15, 2008