In case you missed it, the United States elected a president yesterday. I try to stay away from politics — it’s only fun in Chicago, anyway — but last night, I anxiously tuned in.

Election night television, it seems, hasn’t changed much in the past four years — the same guys in the same bad suits, pointing at maps, reading wire updates, and trying not to screw up. The biggest difference, I noticed, is how the main tool I really used was Twitter.

To the daily Twitter user, this, by now, seems obvious; a cliché barely worth repeating. But step back for a second and think back to an era — not long ago — when this didn’t exist. When the only analysis and opinion you had instant access to was from your friends in the room and the mouth-breathers the TV producers had picked for you.

Then look over at Twitter, where the room is bursting with fresh news, links, photos from everywhere, alerts that Karl Rove is melting down or that Diane Sawyer seems wasted, jokes coming so fast that you can barely keep up. (Many of them even funny.) You control the content, the sources, the volume, the pace, and your drink. Sometimes, it’s wrong, but it’s quickly corrected, and you should be more skeptical anyway. And if you want, you can participate. You’re not just watching.

Over the past ten days, with Hurricane Sandy and now the election, I’ve spent an unusual amount of time at home, sitting on my couch. The TV was often on, and sometimes useful: Some stuff is still better and faster observed in live video format. The emotion of an extended human speech will probably never travel well in 140-character text messages. Likewise, a television meltdown is still more memorable and lasting than a Twitter meltdown, perhaps because of its relative improbability.

But these days, if I had to choose one media tool to rely on — a cable box with 200 channels or a well-curated Twitter feed — Twitter now wins every time, no contest. And when I have both, I’m mostly paying attention to Twitter, with the TV providing background noise. The “second screen” is now my first screen. And compared to Facebook, which has been a relative disappointment over the past few big events — stale news and links, lame comments from distant relatives or acquaintances, too many sponsored Greek yogurt recipe links — Twitter is mostly doing it right.

While you’re here:

• Obviously, most people still aren’t using Twitter. This is really Twitter’s biggest job — getting more people to use it. The service is stable, the product is good, and the business is coming along. But most people still aren’t using it. So: How? A mix of distribution, marketing, product design, and magic, I guess. One likely problem: It’s still too hard for people to get started with Twitter. I’m generally happy with my view of Twitter and the 2,200+ people I follow, but I’ve spent the past 5 years refining that list. This seems to be why Twitter is pushing things like curated Twitter pages for big events like the election and the Olympics. They’re so much better than an empty timeline, or 10 random celebrities, but there’s so much more to do here.
• This is where Twitter’s “cards” thing might actually be interesting. When NPR tweets out an election news update, for example, it might be cool to be able to attach some sort of live or interactive version of the state-by-state “big board” it was keeping on its website. This might get annoying — Twitter’s all-time best feature is its simplicity — but we’ll see. Likewise, companies will have to weigh the costs and benefits of displaying this sort of information within Twitter, rather than using Twitter to drive people to their own websites. (What’s my attention worth to NPR on their website vs. on Twitter? Is it a big difference or a small one? How to really measure?) But it’s at least worth thinking about.
• That whole Twitter developer drama shitstorm feels like it happened ages ago. I don’t know about you, but I haven’t been using Twitter less since then. Nor have I felt any urge to use App.net, or some other alternative. If anything, Facebook and Instagram seem less exciting to me these days, but that’s another post. And this isn’t to say Twitter is perfect — many of the company’s decisions are frustrating or annoying — but relative to most companies and services I deal with, it’s pretty solid.
• The iPad mini was great on election night. It’s almost the perfect Twitter device: Light enough to hold for hours, but more tweets on the screen than an iPhone. And it was easy to switch to handheld TV mode, via the Time Warner Cable app, when I wanted to watch two channels at a time. This sort of living-room-couch usage is where a bigger iPad “classic” is also great, especially if you’re mostly resting it on your lap or a table. (I’d still like to consider an even bigger iPad for this sort of situation, see Forget The iPad Mini - Is There Room For An iPad Maxi?) But the mini definitely didn’t feel too small for couch surfing; I’d still recommend it as the go-to iPad. (More here.)

Apple’s iPad business has been a huge success since launching 2.5 years ago, selling more than 100 million tablets and generating about $60 billion in revenue. Now, with the new iPad mini in the picture — it launched last Friday in 34 countries, and “practically” sold out over the weekend — Apple’s iPad sales are likely set to accelerate.

My take after spending a bunch of the weekend with the iPad mini: This is the real iPad. With the exception of screen sharpness, everything about it is better than the bigger, “classic” iPad — and screen sharpness won’t be a deal breaker for the vast majority of people.

I expect Apple to continue to sell the big, old iPad indefinitely: In some situations, it is superior, and it’s likely to get lighter and thinner sooner than later. (I’d even love to see Apple experiment with a really big iPad someday. That might be fun.) But once most people can buy an iPad mini — Apple will likely have supply issues well into next year, artificially limiting sales — I expect the iPad mini to become Apple’s best-selling tablet. (And its second-best selling device, period, after the iPhone.)

• The best thing about the iPad mini is its weight — it’s almost effortless to use, and that’s a big difference. The full-size iPad is more luxurious with its bigger screen, but its weight and density always made it a little tricky to use. I read on my iPad most nights to fall asleep, and even just holding it steady and upright requires actual effort. (The cracking blow of an iPad 3 falling onto my face and nose, after I’d drifted to sleep, is one I’d never like to experience again.) I feel more confident holding the iPad mini, which means I’m more likely to use it in more places — the whole point of an iPad.
• The non-retina display is a bummer after spending half a year with a retina iPad. But it’s worth the tradeoff. I’ll definitely be replacing this with a retina iPad mini when they’re available, probably in a year or two. This is primarily a reading device for me, and there’s nothing like reading on a retina display. (Ok, a well-printed book, I guess.) But an arm’s length away, the iPad mini screen is good enough not to drive me crazy. Small text is hard to read, but zooming around is easy enough. Again, the dramatic increase in portability is worth it.
• I’m giving up now on keeping this thing remotely scratch-free and perfect. This is officially my “beater” iPad. That means I’m going case-free, baby. I’m going to use it on the subway, I’m going to carry it unguarded in my pocket, and if I have to whack someone with it, so be it. I’ll probably keep it in a sleeve (or use the smart cover I bought) when I throw it into a backpack. But the plan is to make this thing my workhorse carry-around iPad, and if that means getting a little scuffed up, that’s okay. The replacement price, if necessary, isn’t too much to swallow anymore. (That’s one of the reasons I went with the cheapest, 16 GB/wi-fi base model.)
• I have never wanted an Instagram iPad app more badly than I do now. Pretty much every other iPad app looks great, and I’ve started fresh with a skeleton crew of apps — Twitter, iBooks, Instapaper, a few others, and that’s it so far. But the iPhone (non-retina) version of Instagram looks horrible on this thing. Let’s do this.
• The big question, which I won’t know the answer to for a few weeks or months, is how the iPad mini will fit into my gadget routine. Where will I use my iPhone instead of my iPad mini if I have both? Where will I bring my retina iPad? (There’s still nothing like watching HD video on a retina screen. Planet. Earth.) Will I ever bring both iPads? (One has LTE, the other needs to tether.) What about my 2-year-old-but-still-unbelievably-quick MacBook Air? If I were to design my ideal technology kits for a week-long business trip, a Saturday around town, or a normal day of work, they’d all probably be different. Is the iPad mini too much like a phone? Is the big iPad too much like a laptop? Which do people want to buy more? That’s what we’ll eventually find out.

Anyway, the iPad mini, after a day’s use, is the closest thing I’ve found to the gadget I started wishing for in late 2008, which I’d called the “iPod touch HD.”

What is it? A tablet computer with a 7- or 8-inch multi-touch screen — about four times the iPod touch screen area — with Apple’s OS X built in. This includes wi-fi access to iTunes for music and movies, optional 3G service (or wi-fi/Bluetooth tethering to an iPhone for Internet access), and access to the App Store. [...]

What will we use it for? Everything we use the iPhone for, except phone calls. And many things we use our computer for, except everywhere. This includes: Listening to music, watching videos, surfing the Web, reading e-books and Instapaper articles, playing games, writing blog posts, etc. We won’t use it for Photoshop or anything we need a real file system for. But that’s okay — that’s why we have a computer at work and at home.

Perhaps the most impressive part: Back then, I thought it’d be lucky to be able to buy one of these things for “for $600, or $700 with more memory. Halfway between the MacBook and the iPhone, right where it belongs.” The iPad mini starts at $329 — half the price I’d imagined. (And its so-so competitors are even cheaper.) That’s pretty nuts.

(For another hands-on look at the iPad Mini, see Fredric Paul's iPad Mini Review: Few Surprises, Lots Of Questions.)

This post originally appeard on SplatF with Dan Frommer.

Apple’s iPad mini goes on sale this Friday, and big questions for Apple include: How will it affect overall iPad sales? Will it cannibalize bigger, more expensive iPads? Will it sell out, despite a price premium over competitors like Amazon’s Kindle Fire?

Based on early reviews, it appears the iPad mini is on the verge of becoming the “real” iPad. That is, the full-size iPad (“iPad classic”?) will still exist indefinitely, but most people will end up buying the iPad mini. It’s less expensive, easier to handle, with the main immediate tradeoff — lower display resolution — something that most people won’t hold against it, if they even notice it. (Let’s not forget that most people on the planet have never seen a retina display, let alone purchased a retina iPad.)

Apple has, of course, seen this movie before. The iPod mini, introduced in 2004, was a catalyst that sent iPod sales through the roof, bringing millions of new buyers to the iPod and to Apple in general. It wasn’t perfect, either — it had a much smaller storage capacity than the bigger iPod, and wasn’t that much cheaper — but it was cheaper enough and fun and colorful and small and people loved it.

In 2003, the year before the iPod mini launched, Apple shipped 1.5 million iPods. In 2004, after the iPod mini went on sale in February, Apple shipped 8.3 million iPods — more than 5X as many.

That multiplier is probably not going to happen here: Apple has already shipped 58 million iPads over the past year, and I’m not sure Foxconn could even make 300 million iPads over the next year if Apple asked it to. But I wouldn’t be surprised if the iPad mini at least helped Apple double iPad sales year-over-year by the time supply and demand is in sync.

There are many reasons why the iPad isn’t the iPod all over again, or at least not exactly the same story. These range from competition to supply constraints to overall growth of the mobile device market to Apple’s already massive popularity. But I think it’s safe to say the iPad mini is going to be huge for Apple — and huge for Tim Cook’s prediction that the tablet market will outgrow the PC market.

This post originally appeared on Splat F with Dan Frommer.

Google’s Nexus tablets are supposed to be credible competitors to Apple’s iPads and Amazon’s Kindle Fires. And they’re actually selling pretty well — approaching 1 million sales a month, Google’s partner Asustek recently told the WSJ.

But it should be a lot easier to discover, try, and buy them. For example: Why aren’t there any Google Nexus stores? Tablets are becoming mainstream, but the easiest way to fall in love with one is to experience it in person.

Apple’s retail stores have been a huge, famous success for the company, entertaining about a million visitors per day last quarter. Apple doesn’t disclose how many iPads it sells in its retail stores, but last quarter, Apple sold 1.1 million Macs at its 390 stores, or about 23% of all Macs sold worldwide. I wouldn’t be surprised if at least 2 or 3 million iPads were sold in Apple stores during the same period — if not more. With the iPad mini about to launch, Apple stores should see record traffic this quarter. And you can’t buy a Nexus anything there.

Microsoft, to its credit, is launching 32 pop-up shops in the U.S. and Canada for its Surface tablet this holiday season. My first and only experience so far with the Surface was by accident — at one of these booths in New York’s Time Warner Center last weekend — while I was picking up hurricane supplies at Whole Foods. I didn’t buy one, but I know where to go back and play with one when I have more time. The Surface is far from a sure thing, but Microsoft’s investment in these pop-up stores is smart.

Barnes & Noble retail stores, likewise, deserve most of the credit for the Nook’s success so far. And Amazon — the e-commerce king — even distributes its Kindle devices in some retail stores, especially in the U.S.

Google even knows how to build a fun in-person experience: Its Android booth at Mobile World Congress — photo above — is always a huge hit, including free smoothies and a slide. There were some Chromebook stands. And its offices are famous for their creature comforts.

Google Nexus shops could actually be cool, and might help drive meaningful Nexus tablet sales. So where are they?

This article originally appeared on SplatF with Dan Frommer.

The weak spot on Apple’s September quarterly earnings report was the iPad sales number: 14 million shipments, down from 17 million in the June quarter.

That’s almost three times as many as the number of Macs Apple shipped during the quarter, but it reflects only 26% growth from last year and 18% fewer iPads than the June quarter. Hardly a growth rate to be ecstatic about when the bold prediction is that the iPad/tablet industry will grow to zoom past the PC industry.

Tim Cook’s comments on Apple’s earnings call should soften the blow a little.

He said:

• The drop in iPad sales (to people) from the June quarter wasn’t as big as the reported drop in iPad shipments (to the sales channel). This is because iPad channel inventory had grown by 1.2 million units in the June quarter, so the September quarter didn’t have that same boost.
• This also affected year-over-year shipment growth, as the year-ago quarter was also uncharacteristically strong. It, too, included channel inventory build.
• So: iPad sales to people, or “sell-through,” actually increased 44% year-over-year, vs. the 26% in reported “sell-in,” or shipments.
• 14 million shipments actually “exceeded” what Apple had anticipated. Apple expected a seasonal decline in September quarter iPad shipments vs. June quarter iPad shipments. OK.
• One reason Apple expected a sequential, seasonal decline: Because K-12 sales taper off after the June quarter, while higher-ed sales pick up in the September quarter. And higher-ed customers are still buying notebook PCs for the most part. (Mac laptop sales grew 9% year-over-year and grew 31% from the June quarter.) I don’t know how large edu-related sales are for either the iPad or Mac businesses, but this sounds plausible.
• People also delayed iPad purchases because of new product rumors.

Fair enough. One quarter isn’t a reason to get worried about the iPad, anyway.

But two big questions remain:

1. How big is the iPad market really going to get? Is this something everyone’s going to have, or a luxury gadget?
2. How will the iPad mini affect the overall iPad business? Especially if there are severe shortages during the holidays.

See you again to go over this in January.

Apple reported September quarter financial results Thursday: An $8 billion profit on $36 billion of sales, representing 27% revenue growth.

iPhone sales — 27 million — were better than expected, thanks to the iPhone 5 launch late in the quarter. But iPad sales — 14 million — came in well below expectations, ahead of the iPad mini launch in November. And Apple's iPod business — remember that? — fell below $1 billion for the first time in 8 years.

Here's the quarter in charts.

What's the old rule? The bigger a company gets, the slower it moves? Not so in Apple's case, at least not this year.

After a mostly-sleepy 2011, Apple has delivered a huge set of new product launches this year, in unprecedented pace.

These are...

• All-new iPad mini
• iPad third and fourth generation with significant upgrades
• All-new iMac, MacBook Pro
• All-new iPod touch and iPod nano
• All-new iPhone 5
• iOS 6 and OS X Mountain Lion

Compare this to 2011, when Apple launched...

Perhaps this is Apple's current playbook: A slow year, then a fast year. We'll see what next year brings — maybe an iPhone 5S and minor, incremental updates to everything else. Maybe, a big, new product in the spring, like an Apple television — or maybe not. Pseudonoymous Apple blogger Sammy the Walrus IV has a good post pondering where Apple goes from here; "the AAPL Unknown."

But this year, at least, Apple has been knocking it out of the park with big-update product launches at an unprecedented pace. It's really impressive, and shows that Tim Cook is doing a great job so far as Apple's CEO.

Next data point: Thursday afternoon, when Apple reports September quarter financial results, we'll see if its business is still growing as impressively as its product lineup.

Also: When Will Apple Peak?

But Amazon’s Kindle Fire thing is half the price! But the Nexus 7 is way cheaper!

So?

Apple is going to sell out of its Christmas 2012 supply of iPad minis no matter how much it costs — $329, $200, whatever. Why leave money on the table? If it can sell 100% of its iPad mini supply for more than $329, why bother selling any to people who would only buy it for less than $329? (Also, this helps preserve Apple’s margins.)

Then, next year, Apple can launch the retina-display iPad mini at the current (or similar) price, and slice $100 off the non-retina model. The same way Apple continues to sell the iPad 2 for $399 and the iPhone 4S for $99 — $100 off their current-year-model prices. (Perhaps the 2013 prices will vary, depending on what Amazon and/or Google, etc. are charging then.)

Either way, it’s a sure sellout this year and a good story to tell next year. Smart.

This article originally appeared on SplatF with Dan Frommer.

What does Apple's new iPad tell us about Apple's future new product launch plans? Maybe a little.

Over the past few years years, Apple has scheduled its gadget launches in fairly regular, annual cycles. That is: New iPad in the spring, new OS X in the summer, new iPhone and iOS in the summer or fall, new iPods in the fall. (New Macs whenever.)

But with today's big iPad launch — including the iPad mini and a new, fourth-generation iPad — Apple leaves a big question mark for next spring: What's it going to announce between January and June?

Will Apple move the iPad to a six-month update cycle, unveiling new iPads annually in both the spring and fall?

Probably not — an annual update still seems frequent enough. People aren't likely to buy new iPads more often than every couple of years, and component breakthroughs aren't always going to happen every six months. Plus, it's not like competitors are breaking through the market with regular updates.

But it does make sense to move Apple's iPad updates to the fall, in time for the big holiday shopping season. With rivals like Amazon and Google (and soon Microsoft) finally starting to catch up in the tablet market, it no longer makes sense for Apple to sell half-year-old tablets as Christmas presents.

So what will Apple do in the Spring? Something, right? Going six months before another launch seems unlikely.

It's probably not going to be another iPhone or iPod. This really sounds like an opportunity for something new.

One possibility: Finally, an Apple television set. Spring isn't necessarily the ideal time to start selling a TV — right after Christmas and the Super Bowl — but slowly rolling out a TV might be a decent idea, anyway.

Or something else? Perhaps a new fitness device in time for warm weather? Or an entirely new gadget that we haven't even considered yet?

Either way, there's now room for something.

Photo: Grey Clayman

For the first time in a long time, two American companies are driving innovation and leading one of the planet's most important industries.

(This report also ran in the Fall/Winter 2012 issue of SAY Magazine.)

The first half of 2012, I flew more than 60,000 miles, searching for interesting tech stories for ReadWriteWeb, including stops in Korea, Japan, Iceland, Spain, Germany and Silicon Valley. The biggest meta-trend I've observed: How two U.S. companies, Apple and Google, stand tall as the world's most influential mobile companies, leading one of the planet's most important industries.

It wasn't always this way. Now five years after the first iPhone debuted and almost four years since Android launched, it is easy to forget that America was once a mobile-phone backwater.

The iPhone-ification Of Japan

One trend I've enjoyed watching over the past several years is how Japan — perhaps the most interesting mobile-phone–accessorizing nation — has embraced the iPhone.

In December 2007, eight months before the iPhone launched in Japan, but shortly after it had gone on sale in the U.S., I spent a week wandering around Tokyo, zipping in and out of electronics stores. It was a fascinating experience. Everything felt so foreign, because it was. In the States, it already seemed obvious that a full-touchscreen smartphone was the device of the future. But in Japan, it felt like the opposite.

The most sophisticated phones were big, long flip phones without touchscreens. Gadget department stores had huge sections of charms that you could buy to attach to a tiny loop on your phone: Cute little animals, cartoon characters, food items, screen wipers, all sorts of stuff. (On a later visit in 2010, even Japanese Starbucks stores sold their own cellphone charms, including a tiny plastic coffee cup.)

Handsets competed mostly based on physical design, color and features such as built-in mobile TV support. One new device, the "KDDI InfoBar 2," looked more like an art project than a phone, with colorful buttons taking up much of the phone's face. Having already fallen in love with the iPhone, this seemed strange to me.

In many other ways, the Japanese were far ahead of the world: NTT DoCoMo, the dominant Japanese operator, had long established its mobile Internet services, and a universal mobile payments system meant you could pay for a subway ride or can of coffee with a chip in your phone. Meanwhile, most Americans were still learning how to send text messages.

Fast forward to May 2012, when I spent another week in Japan, again spending an unhealthy amount of time in electronics stores. I knew the iPhone had become popular in Japan and that local cellphone manufacturers had embraced Android. But I was shocked by the extent.

Those long aisles of cellphone charms are now dominated by a dizzying selection of iPhone accessories and cases, ranging from the practical to the absurd.

At one store, a $50 iPhone case looked exactly like a fried tonkatsu cutlet, the breadcrumb texture down to an incredible detail. At another: a case with a rubber hand on the back, so you could "hold hands" while talking on the phone. (Creepy.) I saw an entirely new selection of charms that plug into the iPhone's headphone jack, including tiny pieces of sushi, a Tokyo commuter train car and Kapibara-san, my favorite Japanese fictional character. And an elaborate, $40 gadget in the shape of a baseball stadium — slip your iPhone into the "AppBaseball" plastic slot — designed as an analog controller for a baseball game from the App Store.

There weren't as many toys specifically for Android because there are literally thousands of different Android devices and only a few that sell in enough volume to justify their own custom accessories. But all the big Japanese phone makers had switched to Android in my absence — the homemade, custom stuff was all but gone.

The Rise Of Mobile Software

What happened? Why did two American companies grow to dominate the mobile world? In a word: software.

If you watched the rise of Japanese electronics companies such as Sony and Panasonic in the '80s and '90s, most of their skill was in hardware design, engineering and manufacturing. They were amazing at making things tiny, with superb industrial design. The impossibly thin Sony Discman I bought in Hong Kong in 1998 is still one of my favorite gadgets of all time.

Hardware engineering and distribution were the most important traits of early mobile companies, and that's how Nokia, Samsung, LG, Sony Ericsson, Kyocera, Sharp and even U.S.-based Motorola moved the needle. For software, they either outsourced — thus, Symbian's early smartphone OS dominance — or made their own. But it was mostly junk, and that was okay because screens were small and everything was very simple.

Then in January 2007, Apple changed everything with the iPhone. Sure, its industrial design was slick and its touchscreen looked different than other phones on the market. But its biggest revolution was software. The iPhone's OS was as strong as a computer's, and the apps it could run were super-advanced. Apple's iTunes sync software was miles better than anything Nokia, RIM or any rival offered. When the iPhone App Store launched in 2008, it became the gold standard for mobile software.

Google's Android project followed. It was never as good as the iPhone software, but it didn't matter because companies like Samsung and HTC couldn't get their hands on Apple's OS. For many purposes, Android was good enough. And its easy (and free) licensing meant anyone could use it for almost anything. Samsung, most notably, has found success with its Android-powered Galaxy lineup, and almost every mobile company around the world has bet itself on Google. (Nokia, now in rebuilding mode, has also attached itself to a U.S.-based platform, the Microsoft Windows Phone.)

Back In The U.S.A.

A decade ago, a tour of the world's mobile-phone capitals might have started in Finland, home of Nokia, stopped in London to visit Sony Ericsson (itself a joint venture between a Swedish telecom giant and Japan's gadget leader) to Korea for Samsung and LG, perhaps to Germany for Siemens, wrapping up at Motorola — the company that invented the cellphone — in the Chicago suburbs. Of these, Samsung is now the only one still profitably making mobile phones, and its strengths are still mostly hardware and distribution — it's hardly a software-platform company.

Today, the most important mobile corridor in the world is the one in Silicon Valley, California — the nine-mile drive between Google's headquarters in Mountain View and Apple's in Cupertino. Until the next revolution, at least.

(This report also ran in the Fall/Winter 2012 issue of SAY Magazine.)

Lost in the recent noise about Twitter's developer relations and product designs is that Twitter is quickly (and relatively quietly) becoming a successful advertising business. And it's doing this in its own way: Not by running banner ads or video pre-rolls, but through its own interactive, networked ad products.

Twitter Ads March Ahead

Most Twitter users don't - and shouldn't - visit Twitter's Advertising blog. But it's actually pretty interesting. The cadence and variety of announcements, including new targeting features and measurement tools, suggest Twitter's advertising team is "shipping" regularly across many disciplines.

And something's working: Twitter's ad boss Adam Bain recently took the top spot on Adweek's list of the 50 top industry power players. "Twitter is where the new ad wars are being waged," Adweek gushed, noting that "promoted Trend ads now command $120,000 a day - and advertisers have to wait in line." (Adweek cited Bloomberg's earlier report that Twitter projected $1 billion in revenue in 2014, but nothing more recent.)

Bigger picture, Twitter is building an advertising product that's vastly different than what other media companies offer.

Twitter ads are designed to be human - content, in a brand's "voice," but not robotic - and meld with the content around them. They're designed to provoke feedback - via favorites, retweets, hashtagged tweets, and replies - in the same medium they're created and presented in. They're simple, so they can be created on-the-fly as events unfold. And advertisers can increasingly target them to people who might actually be interested in their pitch.

"The canvas is the conversation itself," Twitter CEO Dick Costolo said on the Charlie Rose show last week, contrasting Twitter's content-based ads to previous, "megaphone"-like ad experiences. "What we're trying to tell marketers is, you might not even go into a campaign knowing what you want to say in advance."

That's not to say they're perfect - Twitter and its advertisers are just as new to this as we are, so it's still a learning experience. Some of the ads I've seen seem awkward and forced, or just lame, but I've also actually followed a few "promoted" accounts I didn't know about, too. Either way, even I've found Twitter ads less detracting and more compelling than the typical banner ads on most media sites. And that's the idea.

"Our business is only going to work if we’re putting content in front of our users that they want to see and that they engage with. And that’s the simple equation," Costolo told CNBC this week. "If we do that, the users will be happy, our business will work, and our advertisers win."

But it would be a mistake to assume that ads are solely driving Twitter or its product decisions.

Users First, Business Next

I've written, now a few times, about Twitter's utmost desire to remain independent, and how that will require - sooner than later - a robust advertising business. ("Big money soon, or Twitter becomes Windows Live Chat Bird or Google+ for Glasses, and we all lose.")

But to my understanding, that's actually not the driving force behind big-picture Twitter's decisions. The nuanced feedback I've received repeatedly is: Yes, obviously, the ad business matters. But actually, what's really important is user growth.

Twitter "only" has 140 million users. (More than that now, probably, but that's the last "official" figure.) Yes, that's more than 10 million users, but it's not 1 billion. So, as a result, product decisions are made with the user in mind first and foremost - and especially with the future user in mind. What's going to make Twitter better for its next 800 million users than it was for its first 200 million? How can Twitter be simpler, more engaging, and more attractive?

That won't please everyone, especially - as we're seeing - Twitter's geeky early adopters. But it's crucial to Twitter's future - especially as an independent company. And it makes much more sense than the idea of tweaking the UI just to grease existing advertisers.

The result, if everything works, could be a Twitter with many hundreds of millions of users, and a billion-dollar-plus ad business. Not bad for a company whose business model was a punchline for so long.

Twitter CEO Dick Costolo photo (cc) Kevin Moloney/Fortune Brainstorm Tech via Flickr.

Apple sold 5 million iPhone 5s in its first weekend - a company record. But some people expected more, and now have to explain why Apple didn't top their predictions. In reality, this isn't that big a deal. The rest of the year matters a lot more.

Compared to last year's iPhone 4S launch, when Apple sold 4 million phones, 25% growth may seem disappointing. This is Apple, after all, and Wall Street is used to seeing the company blow past expectations, not come up short. (The iPhone 4S launch, if you recall, was more than twice as big as the iPhone 4 launch.) This number isn’t 10 million or even 8 million or 6 million, so some are saying that it’s “WORSE THAN EXPECTED” or “very disappointing”.

So, yes, 5 million sales is below some estimates. But that really doesn’t mean much in the long run. Why not?

First, for the real story, you need to think about supply and demand, and once again, demand surpassed supply. Apple stopped taking launch weekend pre-orders after only a short period of time, and many stores were sold out of various iPhone models throughout the weekend. We still don’t know how many iPhones Apple could have sold over the first weekend if it had unlimited supply, and we may never.

Next, mobile is a complicated industry, where 2-year contracts often dictate purchase decisions. Apple sold almost twice as many phones over the past four quarters than it did the four quarters before that. Few of those people are already eligible to buy an iPhone 5 at a subsidized rate -- it'll be months before they can justify buying iPhone 5s. Anecdotally, I’ve also seen mentions that AT&T was being stingier about early upgrades this year than last year.

Further, first-weekend sales just aren’t that important relative to an iPhone’s lifetime sales. For example, the 4 million iPhone 4Ss Apple sold on launch weekend last year represent just 3.5% of all iPhone shipments over the past four quarters. The 1.7 million iPhone 4s Apple sold opening weekend represented just 2.2% of the phones it would sell over five quarters before launching the iPhone 4S. It's nice for Apple to sell 5 million iPhones in a weekend, but it'll be more impressive if it can sell 200 million phones over the next year.

Long story short: It’s a fun press release to see from Apple every year, but the iPhone 5’s real sales performance will be measured in months, quarters, and maybe even years, not weekends. It’s still crucial for Apple to sell a lot of them, but late-December sales will be a lot more important than mid-September sales.

iPhone 5 line photo (cc) Blake Patterson via Flickr. Portions of this article were originally posted at SplatF.

Apple's iPhone 5 goes on sale Friday, including a polished new look. But only one new feature actually matters: Its super-fast LTE wireless connection. With Internet access that's amazingly quicker than before, mobile computers like the iPhone 5 can finally live up to their promise.

What's LTE?

Simply put: It's the latest version of wireless network technology, used in the U.S. by Verizon Wireless, AT&T, and more recently, Sprint. LTE has been around for a couple of years, and Apple included it in this year's new iPad. (That's how I know firsthand how amazing it is.)

But this is the first time Apple is including LTE in an iPhone. This means millions of people will be using it for the first time over the next few months. You may hear the terms "4G" or "4G LTE" too, but nevermind the jargon. Just know that LTE is impossibly fast.

Why LTE Is Revolutionary

Stop me if this sounds familiar: Walking to the train station, want to load my email before I get on the train... Waiting... waiting... waiting. And, there goes my train. Or: Trying to load this map so I can find where to meet you... Loading... loading... loading... loading...

In practical terms, LTE means you'll finally be able to download stuff to your phone fast - in many cases, faster than your home broadband connection. It means you'll finally be able to stream video - even in high resolution - without endless buffering. Or even video chat. It means you'll load your Instagram feed in a snap. It means never waiting for your phone anymore; it'll finally be waiting for you.

Don't get me wrong: Having an iPhone for four years (and a Palm Treo for two years before that) has been much better than the dinky candybar phones before. Relatively reliable access to maps, GPS, email, shopping, and entertainment has legitimately changed my life. But the lag of a slow mobile Internet connection - familiar to many AT&T iPhone subscribers! - has always added an element of frustration. I stopped trying to watch video on my phone a long time ago.

As I've experienced on my iPad, LTE changes this. It's going to be as big of an improvement to the iPhone as the iPhone was to prior phones. Or, if you've used a computer with a solid-state ("flash") disk, as big of an improvement as that was from old, spinning hard drives. Especially for a mobile device, speed really matters.

And don't take my word for it. LTE got a lot of praise in the early iPhone 5 reviews. LTE "data downloads and uploads just fly," Walt Mossberg wrote for the Wall Street Journal. "Using the iPhone 5 on LTE is nearly indistinguishable from using it on Wi-Fi," John Gruber said at Daring Fireball. "Web pages load in a snap, Siri parses input and responds promptly." The New York Times' David Pogue called it "wicked-fast."

What's The Catch?

For one, there's a risk that mobile operators - running LTE networks for the first time - will be in for a cruel surprise, just as they were with the iPhone 3G and their old networks. We simply don't know if LTE networks will be able to keep up with rising traffic. AT&T and Verizon could each conceivably get 5 million or more new LTE users by the end of this year, and that might swamp their networks. We just don't know.

The other potential catch is that LTE ends up being so good that we use it more than we ever used 3G, costing us more money. Mobile operators are switching their pricing to match the future of their business, where Internet access is more relevant than selling "buckets" of voice minutes for phone calls. If you fall in love with streaming video or music over LTE, it may be costly. Perhaps it'll be worth it, if you're getting a lot of value out of it. But don't be surprised if your mobile bill goes up rather than down over the next few years.

Still, if all goes according to plan, LTE is going to be a killer feature for the iPhone 5 and for mobile computing. This stands to benefit phone makers, mobile operators, and especially application developers. Apps should work as well on mobile devices now as they do on desktop computers. And that opens all kinds of new doors.

Photo: NASA/MSFC via Flickr

Related: The Real Reason AT&T And Verizon Are Switching To "Shared" Pricing Plans

Apple's iPhone 5 isn't just a new gadget. It's the lifeblood of the world's biggest tech company, representing half of its sales and even more of its profits. And introducing the new iPhone -- getting good buzz and getting people excited to buy -- was a crucial part of the puzzle. Here's why September 12, 2012 was one of the most important days in Apple's year.

Since launching in 2007, the iPhone has grown rapidly. A business that barely existed five years ago is now easily Apple's biggest, representing half or more of the company's sales, and an estimated two-thirds of its profits.

However, as the iPhone 4S has matured, the iPhone business has rapidly decelerated. During the June quarter, iPhone sales increased just 22% year over year, compared to typical growth rates around 100% over the past two years. That's why it's time for something new and attractive.

The new iPhone isn't just important to Apple's financial performance. It could also help Apple continue to chip away at Google's lead in the U.S. smartphone market. Recent comScore stats show Apple growing faster than Google over the past six months.

Here's one more fun fact. Last quarter, Apple's iPhone sales were almost as big as Microsoft's entire business. Last March the iPhone, in fact, passed Microsoft.

Here's how the iPhone business stacks up against some of tech's biggest companies, either reflecting their June quarter sales or the most recent overlapping quarter.

To sum up: This announcement is huge.

Apple and Amazon are both in the business of designing small computers - tablets, ereaders, phones, media players - and selling them to the public. But how they do it is the big difference. And that's best depicted by the astonishing difference in the two companies' profits.

Amazon's Approach: Sell Now, Profit Later

Amazon CEO Jeff Bezos explained his approach last week at the company's Kindle press event.

"We want to make money when people use our devices, not when they buy our devices," Bezos said. "If someone buys one of our devices and puts it in a desk drawer and never uses it, we don't deserve to make any money."

Bezos clarified that he's not interested in selling devices at a steep loss - the razors/razorblades model. He is most interested in a business where Amazon makes a little money here, a little money there, and gives people a really good deal.

Amazon's mantra: "Above all else, align with customers. Win when they win. Win only when they win," Bezos said.

A little different than most companies? Yes. But that's okay: It certainly resonates with customers.

Apple's Approach: Big Profits From Small Devices

Apple generates profit - up to hundreds of dollars per device, especially for the iPhone - every time it sells a gadget. Its media ecosystem is there to support the hardware. In other words, iTunes and the App Store exist in large part to sell more iPhones, iPads, Macs, Apple TVs, and iPods.

As Apple CFO Peter Oppenheimer described on a 2008 earnings call: "We’re thinking about the App Store in the same way that we think about the iTunes store. While it will generate some revenues, it will be a small profit generator, and just as with the iTunes store making iPods more attractive, we think the App Store will make the iPhone and iPod Touch more attractive to customers. We’ll hopefully see an indirect return by selling more iPhones and iPod Touches."

What's Better? They're Just Different

Obviously, if short-term profit is all that matters, Apple is winning by a mile. Apple has generated more than $73 billion of profit over the span of this chart, while Amazon is around $2 billion. Some of that has to do with the relative size of the companies; Apple is about three times bigger, sales-wise. But Apple's approach is still dramatically more profitable on a relative basis.

That said, there's also merit to Amazon's approach. By pricing its devices lower, it's potentially bringing its technologies to more people in different economic positions. Apple has lowered its pricing premium significantly over the years, but there are still potentially millions of people who could justify buying a $200 Kindle Fire but not a $400 iPad. Apple is now expected to launch a smaller, cheaper iPad, something it once suggested it wouldn't do - an action attributable in part to Amazon's success.

Will Amazon's approach ever lead to substantial profits? If Apple and Google are driving media and app prices lower, that leaves less room for Amazon to profit in the future. But Amazon is a multifaceted machine, ranging from digital media sales to paper-towel delivery. It's possible that getting customers all-in on Amazon's digital and Prime services will eventually lead to greater profits across the board.

Another question: Could competition from Amazon force Apple to lower its prices, potentially at the expense of its profit margins? Perhaps, over the long term, on some models. But one of Apple's biggest strengths is the supply chain it has built of the years, meaning better prices and efficiency than its competitors. If Apple and a rival both design devices with similar features and charge the same amount of money for them, it's entirely possible that Apple could generate a profit off each sale while its competitor takes a loss.

The good news: Today's market is big enough for both companies. Profitability will eventually help sift the tablet winners and losers, just as it has in smartphones. (Apple and Samsung the big winners; RIM, Nokia, Palm, Motorola, and others the losers.) Amazon is big enough to keep doing what it's doing; it might work. And in the meantime, Apple will continue to pile up the cash.

Also: What The New Kindle Fire Means For Amazon's Smartphone

Amazon did not unveil a smartphone Thursday, despite speculation to the contrary. But its new Kindle Fire tablets give us some clues about an Amazon phone, reportedly in the pipeline. We see a $200 (almost) loss leader that makes buying anything from or through Amazon beyond easy.

An All-Amazon-Controlled Experience

The idea that Amazon will put a few of its apps on a generic Android phone and call it a day is misplaced. Amazon will control every aspect of its phone, from the way the home screen looks to the way it ties into Amazon's Kindle bookstore, video-streaming service and music cloud locker.

Why?

Speaking Thursday, Amazon CEO Jeff Bezos said, "People don't want gadgets anymore. They want services. They want services that improve over time."

Bezos explainted, "Kindle Fire is a service. What does it mean for a hardware device to be a service? It greets you by name. It comes out of the box with your content preloaded. You can choose from 22 million different items. It makes recommendations for you. [...] A hardware device as a service. That's what people want."

Amazon is all about the experience, front to back -- much like Apple. Expect total Amazon control over any phone it makes.

Aggressive Prices So Amazon And Its Customers Win

Mobile pricing and profit models for mobile devices set Amazon and Apple apart. Apple makes money selling iPhones at tremendous profit and breaks even on media and app sales. Amazon prices its hardware closer to breakeven and hopes to profit on media sales.

Bezos gave some context to Amazon's strategy this week, after introducing the moderately priced $299 large-screen Kindle Fire HD.

"Above all else, align with customers. Win when they win. Win only when they win," he said.

How does this apply to hardware pricing?

"We want to make money when people use our devices, not when they buy our devices," Bezos said. "If someone buys one of our devices and puts it in a desk drawer and never uses it, we don't deserve to make any money."

Jumping from there to a phone, Amazon is probably preparing one that's inexpensive by industry standards, one that's designed so that buyers will keep using it to buy Amazon media, products and services.

Depending on how Amazon distributes its phone — directly or through telcos — Amazon could offer a no-contract phone for $200 or a carrier's standard contract phone for free.

Expect Amazon to use some of its Kindle Fire tricks, too, such as ad-supported subsidies from its special-offers program.

The Boldest Move: Going Around The Carriers?

One of Amazon's interesting announcements Thursday was a 4G LTE wireless version of the Kindle Fire HD, with a special (low!) price for data service. Unlike other tablets -- including the iPad -- which require a relationship with a wireless carrier, Amazon seems to be stepping in front of the carriers here, billing customers directly for 4G service -- at least for the basic package, which includes 250 MB of monthly service for a $50 annual fee. ("Customers can also choose to upgrade to 3 GB or 5 GB data plans from AT&T directly from the device," notes Amazon.)

It would be an especially bold move for Amazon to apply this model to phones: Bypassing the typical carrier service-plan requirements, buying wholesale data capacity directly from AT&T (as it's doing here, and as it does for the 3G Kindle), and charging a lot less for an entry-level smartphone plan than its competition.

Imagine, for instance, an Amazon phone with no monthly voice-plan requirement, fair pricing on data plans and unlimited text messaging. It could conceivably cost half what an iPhone does per month, running on the same AT&T LTE network. And this would help Amazon win with its customers and turn gadgets into services.

But: This would be risky and challenging, even for Amazon. And Bezos may decide that the distribution power that carriers have -- especially domestically -- is too great to fight. (That's the lesson Google learned with the Nexus One.) Perhaps a halfway-there, hybrid approach?

Then again, don't put anything past Jeff Bezos: If any company is ballsy enough to try an end run on the carriers, it's Amazon. 

Either way, if this week's Kindle Fire announcement is any lesson, expect aggressive, ad-subsidized pricing and a service-focused approach with an Amazon phone. And maybe -- just maybe -- a bold move to disintermediate the phone companies.

Also: The Real Reason AT&T And Verizon Are Pushing New "Shared" Data Plans

A new iPhone this year may mean a new "shared data" wireless plan for you, too. They may or may not save you money - that's not the point. They're really designed to put the wireless carriers in a better financial position for the future.

Get Ready To Share

With Apple's new iPhone expected to launch in mid-September, expect to hear a lot of noise about newish, "shared" service plans from Verizon Wireless and AT&T, the biggest U.S. wireless carriers. The big idea: Instead of having separate pools of data allowances between different devices - an iPhone and iPad, for example - all of your family's devices draw from the same pool.

Verizon already requires these plans for new subscribers, and AT&T says it will require them for subscribers who want to use Apple's FaceTime video chat service over the mobile internet. (Translation: Eventually, you'll end up using one whether you want to or not.)

Here's how it works: For each device, you pay a monthly "access" fee. At Verizon Wireless, for example, this ranges from $40 per month for smartphones to $10 per month for tablets. This provides unlimited talking and texting on phones - no more minutes to keep track of. Then, you choose a monthly bucket of data that all your devices use, ranging from $50 per month for 1 GB to $100 per month for 10 GB.

The pitch to the consumer is that these plans are smarter for today's families, which often have multiple smartphones and tablets. If you're not using all the iPhone data you're paying for, why not be allowed to use it on your iPad?

The Business Motive

Perhaps this pricing realignment makes some sense for subscribers. But it really makes sense for the carriers.

Consider how much more time you spend using a smartphone's data signal versus making voice calls. Since I started using an iPhone in 2008, my data usage far has far outpaced my voice usage. Last month, I used 70 voice minutes, but probably spent over 50 hours using data. (Meanwhile, I've accumulated 3,900 "rollover" minutes on AT&T - a near-worthless benefit that made much more sense a decade ago.)

But while our smartphone data usage could now be 10 to 20 times our voice usage (if not more!), the amount of money we spend on voice is still usually half or more of our monthly bills. Below, I've charted the last 10 years' worth of Verizon's voice and data service revenues. Overall service revenue has more than tripled, but data is still only about 44% of Verizon Wireless's service revenue.

With faster wireless networks - the new iPhone is expected to work on Verizon's 4G LTE network - and services like Skype and Apple's FaceTime and iMessage, which "disrupt" the carrier voice and messaging services, it becomes even more important for carriers to shift billing toward data plans.

With more connected devices launching all the time, these new "shared" plans offer greater convenience to subscribers - at a potentially higher cost. But what they really do is insulate carriers from potential disruption to outdated service models, and provide a more stable, logical revenue model for current and future wireless usage.

Phone and tablet photo via Shutterstock.

Gogo's in-flight Wi-Fi service was installed on 1,565 planes at the end of June and available to about 65.5 million passengers in the June quarter. Both of those stats have grown around one-third in the past year. 

That growth has allowed Gogo's revenue and number of wi-fi sessions to increase, even as the percentage of passengers who pay for service (known as take rate) and the amount of money people spend on service have remained flattish. 

Some 5.3% of potential Gogo passengers connected during the June quarter. That's up significantly from 4% take rate a year ago, but down a bit from 5.6% in the March quarter and 5.5% in the December quarter. 

Take rates vary by airline and flight, of course, and air travel is a seasonal business. In April, Virgin America's CEO boasted Gogo usage rates in the low- to mid-20s, including generally passing 50% on its San Francisco-to-Boston route. But not every airline is Virgin America, and not every flight is so full of techies.

Still, Gogo's filing suggests that the company powered about 3.5 million Wi-Fi sessions in the June quarter, up about 75% from last year and up more than 10% from the March quarter.

That's pretty solid growth, and faster than Gogo's overall sales, which grew 51% year-over-year during the June quarter. Operating loss fell to $4.9 million in the June quarter from $7.1 million a year ago. And a $135 million credit line, announced in late June, will keep things moving.

The filing notes that Gogo has contracts to install the service on another 415 aircraft, mostly before the end of next year. That could provide roughly 25% more capacity. Take rate will almost certainly increase as more people bring aboard iPads and smartphones and as they become accustomed to paying for in-flight connectivity. And Gogo just started its international expansion efforts this year. (It also generates almost half its revenue from the "business aviation" market, serving private planes.)

But Gogo faces hurdles, too. Network capacity, for example: It's already frequently slow to connect, and Gogo warns that it must upgrade many planes to new technology to meet capacity demands. Satellite-based competitors could win deals, too. And then there's the overall instability of the airline industry: American Airlines, whose customers generated 23% of Gogo's commercial-aviation revenue in the first half of the year, filed for bankruptcy and may shed planes or lose control to another airline.

Still, for many passengers, Wi-Fi has become a crucial part of flying. It looks like Gogo has plenty of runway left for growth.

Twitter's long-awaited crackdown on outside apps could prove to be one of the boldest and most controversial moves in its history. But if you consider Twitter's position, it's actually reasonable. And it could play an important role in Twitter's survival.

Twitter Today

Twitter continues to grow in every way.

Its name and iconic blue-bird logo are internationally recognized. Twitter @names and #hashtags are splashed on every form of media, from primetime TV to outdoor billboards. The company now has more than 1,000 employees.

And while it is starting to generate a decent amount of revenue through advertising, it is also likely burning hundreds of millions of dollars per year in expenses.

What next?

Well, Twitter could either sell itself for billions of dollars - there may even be a few buyers out there - or it can try to stay independent. And every recent move from the company suggests Twitter is trying to stay independent. 

But: To survive on its own, Twitter must create a very big business, and soon. Specifically, it needs to generate about a billion dollars per year in ad revenue by the year after next. And that's just to meet the (probably conservative) internal estimate that it leaked this June. Really, Twitter should be approaching a billion-dollar ad business by next year. Or it will be at risk of falling behind schedule, and perhaps becoming a division of Microsoft or Yahoo.

Twitter Tomorrow

The keys to maximizing Twitter's advertising business are: Create as many advertising opportunities as reasonable, and tweak Twitter's product and advertising until they work together as well as possible.

In Twitter's case, this means centralizing as much of its usage as possible within its official clients - its website, official mobile apps, and officially sanctioned extensions - where it can display ads and generate revenue.

It's common to hear media companies talk about "scale" or "reach," especially around advertising opportunities. In Twitter's case, it needs to have people as many people as possible reading Twitter within its own environment, to get as much of that "scale" as possible for its ad-sales efforts. It's no longer desirable to Twitter for its users to be elsewhere, where Twitter has little control over their user-experience quality or the advertising they see.

So that's why Twitter doesn't want other companies creating competitive Twitter clients anymore. If you want to enjoy the stuff that's only on Twitter, you need to use Twitter.

(Important: It still wants developers to do many interesting things with some Twitter data, and for them to increasingly build their own products into Twitter. But it's not so excited abut competing for its own users' attention with other companies. That's why - among other reasons, such as resource abuse - that Twitter is increasing restrictions on developers.)

Why So Harsh?

The most common question I've seen is something along the lines of: Why can't I just pay Twitter $25 per year to use whatever app I want?

Two reasons: First, because that goes against the whole "scale" thing - Twitter really does want everyone together. And second, because that's not going to create a billion-dollar business for Twitter. It might become a multi-million-dollar business, but that's just not enough to be worth the distraction. So it's not likely to happen.

It's reasonable that many people are upset by Twitter's decision. Based on Twitter's incredibly developer-friendly past, it might even seem like hypocrisy. (Though the vast majority of users won't know and probably don't care about this change.)

But Twitter's acting in what it thinks are its best interests here.

Remember, the successful outcome is that Twitter gets to stick around and keep existing. The alternative is much gloomier. That's probably worth a little sacrifice.

Twitter CEO Dick Costolo photo (cc) Kevin Moloney/Fortune Brainstorm Tech via Flickr.

App.net, a Twitter clone with a membership fee, has been touted as a powerful, developer-friendly alternative to Twitter. Massive adoption seems unlikely. But it doesn't mean that App.net is doomed to failure, either.

App.net, launched last month by iMeem and Picplz founder Dalton Caldwell, reached its financing goal over the weekend. As of Monday afternoon, App.net had raised more than $700,000 from more than 10,000 backers, beating its $500,000 goal by more than 40%.

That's good news for Caldwell and App.net's team. And with a handful of registered users and developers, and money in the bank, they can now figure out how to develop and market their service. But what does it mean for Twitter? And for the rest of us?

App.net Isn't Going To Replace Twitter

Let's be realistic. Twitter isn't going anywhere just because there's some new Twitter clone out there. (Remember the many prior purported Twitter killers?) Twitter has reached such a level of mainstream awareness and adoption that it's not going to collapse. When was the last time you watched TV without seeing a hashtag on the screen?

Twitter is especially not vulnerable to a service like App.net that plans to charge users money to come aboard. The lesson from years of Web economics is that most people generally won't pay for something they can get for free elsewhere, even if it means looking at a few ads.

And because social networks are exponentially more valuable as they sign up more users, a free, bigger Twitter will continue to be generally more valuable and more useful than a smaller competitor.

But App.net Could Become Useful

Because of its paywall, App.net isn't likely to become the place where comedians, politicians, CEOs, and athletes are all hanging out with you and your friends, the way Twitter is. But that isn't necessarily the goal.

Just as Yammer has become a valuable Twitter-like service for corporations, and Stocktwits a valuable Twitter-like service for investors, App.net could become a useful communication service for other social or professional circles.

Like who? Startup-types, perhaps? (The same early tech adopters that fueled Twitter's initial rise?) Or maybe designers, developers, or Mac nerds. Or scholars, or models.

And because one of App.net's selling points is its flexibility for developers, maybe some software will launch that makes App.net useful to a specific population that we can't even imagine today. It will be near-impossible to match Twitter's ubiquity. But App.net doesn't have to.

(The bigger question, then, is whether App.net can eventually generate enough revenue to pay its bills. And, someday, whether it can create a return for its original investors, Andreessen Horowitz. But building its product and user base is the bigger, more immediate concern.)

Will App.net Change Twitter's Stance Toward Developers?

Recall that part of the inspiration for App.net is the perception that Twitter is becoming increasingly hostile toward developers, discouraging them from creating Twitter clients and taking away features that allow things like Instagram's ability to let you find your Twitter friends on Instagram. Might App.net's funding success change Twitter's strategy?

Not likely.

Again, because Twitter is so far ahead of App.net and all the other Twitteresque services in size and value, Twitter will continue to do what it thinks is best for itself with minimal influence from outside voices.

Perhaps if there's a successful feature or service from App.net, Twitter will copy or integrate it, the way it did with TwitPic (photos) or StockTwits (stock tickers in tweets). But just because a service like App.net signs up 10,000 people over a few weeks, that's unlikely to set off any alarm bells at Twitter. Twitter probably signs up 10,000 new users every few hours.

Twitter's big-picture focus these days is remaining an independent company, and that requires building a multi-billion-dollar business. So far, it has set its sights on advertising, which rewards huge scale and tight control over users. And until that either succeeds or fails miserably, that's what Twitter is likely to use as its guide in making decisions. Not a tiny upstart with a self-limiting growth model.