Someone named Justin Bieber, who apparently is a teenage singer, was supposed to appear at the Roosevelt Field mall on Friday, but stayed away because the crowd had become too unruly. Police asked a record label executive to help disperse the horde using the messaging service, and claim he didn’t cooperate. More from Newsday:

Police arrested a senior vice president from Bieber’s label, Island Def Jam Records, James A. Roppo, 44, of Hoboken, N.J., saying he hindered their crowd-control efforts by not cooperating.

He was in custody Friday night, pending charges that could include criminal nuisance, endangering the welfare of a minor and obstructing government administration, Smith said.

“We asked for his help in getting the crowd to go away by sending out a Twitter message,” Smith said. “By not cooperating with us we feel he put lives in danger and the public at risk.”

Slightly confusing, because Bieber’s Twitter account–presumably the one the cops wanted Roppo to use–does indeed show that he asked his fans to leave at 4:30 pm Eastern:

But apparently that was too late:

Here’s what a mall full of unruly Justin Bieber fans looks like, by the way. Not sure how helpful Twitter would have in the face of this:

But will they actually pay up? Here, the conventional wisdom is not so helpful. Nor are studies predicting consumer behavior. To wit:

• Nearly 50 percent of U.S. Web users are willing to pay for online news, says the Boston Consulting Group.
• Not a chance, says Forrester (FORR): Try 20 percent.

For what it’s worth, my money’s on the Forrester number, or one that’s even lower. My gut says people love consuming news, but only in the broadest sense–Obama doesn’t really Twitter! What was Belichick thinking?–and that sort of stuff, which appeals to a very large audience, will always be free, and you’ll get it from Google (GOOG) or something like Yahoo (YHOO). Which leaves you with a small audience willing to pay for everything else.

But! We should note that people are indeed paying for “content” right now. In fact, they’re paying for a lot of it: $115 a month, up seven percent from last year, says NPD Group. The breakdown:

As of August 2009, 81 percent of U.S. households subscribed to a television service (satellite TV, basic/premium cable, or fiber-optic television service). A similar percentage of households (76 percent) paid for Internet subscriptions. Seventeen percent subscribed to an online music service or satellite radio; and 14 percent subscribed to online gaming subscription services.

More traditional forms of entertainment subscriptions, however, did not fare so well. The number of people subscribing to newspapers fell by 2 percentage points to reach 29 percent in August 2009. Forty-one percent of consumers subscribed to magazines this year, compared to 43 percent who did so last year.

According to NPD, an influx of new smartphone owners has led to an increase in mobile data-plan subscriptions: 9 percent of U.S. consumers had mobile data subscriptions this year, versus just 6 percent last year. Fourteen percent of consumers subscribed to a home-video subscription service, like Netflix, this year, which is 2 percentage points higher than last year.

Ah, see? Problem solved: If you want Americans to pony up for stuff on the Web, just link it to something they’re already paying for, like their cable or Internet subscription.

This is what smart guys like John Malone have been talking about for a while, and it’s also the core of the strategy behind the Time Warner (TWX)/Comcast (CMCSA)/everyone else “TV Everywhere” gambit. But it’s also what many people have been trying to do for a very long time–ask the music industry–with limited success.

The tool has been around for a while and got a formal roll out earlier this fall, but Google (GOOG) product manager Nick Jacobi just showed it off to the chattering (and tweeting) classes gathered at the Monaco Media Forum, so it’s going to get another burst of attention. (Also of interest, apparently: A dustup between Axel Springer CEO Mathias Döpfner and Arianna Huffington. Looking forward to watching that.)

Anyway, the Insights tool is self-explanatory and entertaining, at the very least. For instance, I used it to find out what 35-44 year-old males who like advertising, beer and football (ahem) are watching, and got this results page.

The most interesting part of the results is a mosaic of videos (above; click to enlarge) that my target demographic is watching, which includes some obvious stuff, like “Amazing NFL Football Catches,” and some really obscure stuff, like an episode of “Shazam.” I also found this Kirby Puckett tribute, which pleased me to no end:

The takeaway: The site is losing traffic and money and no longer expects to get all of the $900 million it once counted on from a Google search deal. Also, the company really doesn’t know what to expect of the property going forward, except that it’s a work in progress.

So: Either digital media boss Jon Miller, MySpace CEO Owen Van Natta and the rest of the new team brought in this year to fix the site have an impossible task or expectations are now so low that even modest improvement will look like a huge victory.

Details from the earnings call, which I covered live this afternoon:

• Revenue was down 26 percent at Miller’s Digital Media Group (MySpace and a handful of other sites).
• That’s in part because conventional ad revenue is down and in part because search ad revenue is down.
• But isn’t Google (GOOG) supposed to be paying $900 million over three years in a search deal? Yes, but only if News Corp. (NWS) hits certain traffic/query guarantees, which isn’t happening anymore, says Murdoch.
• How much is MySpace going to miss by? This question occasions much confusion on the call. “I don’t know. But it will be a real figure,” Murdoch says. Then he throws out the number $300 million. His lieutenants suggest that it’s closer to 10 percent, or $90 million. I’ve since checked with News Corp. PR, which says the figure is “in the 100 [million] zone for the year.”
• So what’s the plan to fix all of this? “It’s a work in progress,” News Corp. officials say over and over during the call. Chase Carey, Murdoch’s new number two, uses the phrase at least three times in one answer.
• Any other color on overhaul plans? Nothing you haven’t heard before: The company is trying to become an entertainment portal instead of a social network. Carey: “We’re not trying to beat Facebook. We’re not trying to beat Twitter.”

(Disclosure: News Corp. owns Dow Jones, which owns this Web site).

And the first look at results from News Corp., which owns this Web site, seems similar. Revenue of $7.2 billion are in line with Wall Street’s expectations, and the company figured out how generate earnings of 22 cents a share, a nice bump from the 18 cents a share consensus.

Just as Time Warner reported this morning, News Corp.’s most valuable assets are its film studio and its cable TV business. Its broadcast TV business is wobbling, and its print business has been in decline for some time. A quick look at each sector:

• Movies: Operating income up due to yet another “Ice Age” movie, among other releases.
• TV: Fox’s local stations saw operating income drop 26 percent due to crummy advertising; the Fox broadcast network also dropped because programming costs increased and ad revenue dropped.
• Cable networks: Booming. Operating income up 41 percent, as News Corp. is able to extract increased fees from cable operators for the likes of Fox News Channel.
• Newspapers: Getting hammered. Operating income was a mere $25 million, a decrease of $109 million in the last year. You know why, but for the record: The Wall Street Journal saw ad revenue decline, though price increases boosted circulation revenue.
• MySpace/Web properties. News Corp. doesn’t offer much transparency here, but does say that “earnings contributions” from its Web unit dropped $22 million because of lower search and advertising revenue. Sure we’ll hear more about this during the call.

Beyond the macro take, News Corp. (NWS) is worth paying attention to because of Rupert Murdoch’s increasingly pugnacious stance toward what he calls the Internet’s “Philistine phase”–the one where just about everything on the Web is free. And because Murdoch almost always makes for entertaining earnings calls, where he frequently veers off script.

I’m covering the earnings call as it happens. All notes below are paraphrased unless I use quotes.

CFO David DeVoe notes the digital group (MySpace, etc.) is in “significant transition.” Revenue was down 26 percent at the unit. Says MySpace revenue goals will take longer than expected.

Rupert Murdoch:
Looking ahead, seeing “encouraging trends in most of our businesses.” Broadcast TV business appears to have hit bottom of cycle. Advertising pacing for December looks good. October flat, November up in midteens. Cable TV ads doing well. “Quite pleased” with momentum at film biz.

Cable now generates half of company’s operating income, which is “no accident.” Love those dual-revenue streams, especially when we can jack up affiliate fees.

Digital media group: Difficult to predict when we’ll see improved results, but overhaul has clearly helped it for long-term.

Newspapers: For what it’s worth, all of our newspaper and TV businesses are having a great November.

Very confident about short- and long-term future. Clearly in better shape than a year ago. But recovery is “still a little fragile.” [Note: Rupert is clearly sticking to his initial script this time.]

Q&A

Question: When will you start cutting shareholders some dividend checks?

Murdoch: Not thinking about it. We’re right to be sitting on this cash. We have a $2B debt repayment due next year, so pile isn’t as big as it looks.

Question: How does international cable market look?

Murdoch: For the most part, it’s a new growth area. Markets are relatively undeveloped. So they’re all growing double digits, 15, 18 percent on average. May start another 30 channels this year.

Next, there’s a question about retrans (getting paid for broadcast programming): How many renegotiations will we see in next few years? Murdoch offers a nonanswer, for the most part.

Question: You said affiliates fees were up 18 percent and that affiliates fees represent 70 percent of revenue. So that means cable ads are down, right?

David DeVoe: Yes, but I think they’ll be up a bit this quarter.

Question: How can MySpace search revenue be down? Isn’t Google (GOOG) kicking in a fixed amount through next year?

Murdoch: Quite simple. “We have not been making our minimum guarantees,” so our search revenue will not be what we’d expected.

Missed most of the M&A question and answer, but it Murdoch evidently said he wouldn’t rush into anything. That doesn’t mean that much.

Question: Can we get an update on The Wall Street Journal and the relationship with Amazon (AMZN) Kindle, other e-readers?

Murdoch: Oh. WSJ.com going well. Pricing up very strongly. Will be announcing some “extra developments” with it “if they haven’t been announced already, I’m not sure.” Kindle: Look, it’s a fantastic invention for reading books. It’s not great for newspapers. We’ve gotten them to charge $15/month for WSJ and give us $6.50, but that’s not a great deal for us. Half-a-dozen early-stage e-readers on market for Christmas, and we’ll be available on them provided they give us a good deal. But there’s much more advanced work going on.

Question: What’s the new strategy at MySpace?

Chase Carey: Obviously, we got spread a bit wide and thin. No focusing on heart of business being a social network focused around key content sites. “We’re not trying to beat Facebook. We’re not trying to beat Twitter.” Music, gaming, etc. Farthest along with music. “Clearly a work in progress. We’re still losing traffic.”

And now for some press Q&A. This usually makes Rupe a bit testy, which is fun:

Question: Any interest in NBC?

Murdoch: No. “When things come around, we kick the tires, but we’re not in any talks with anybody at the moment.”

Question: What’s up with MSNBC-Fox News truce, which appears to be broken? 

Murdoch: “We didn’t start this abuse, which we thought went way beyond…finally, we had to allow people to retaliate. When they stop we’ll stop.” 

Question: And is it good for you to have antagonistic relationship with the White House?

Murdoch: No.

Question: Bidding on Travel Channel?

Carey: We’re not going to comment on any specific properties [mumbles].

Question: How will Comcast-NBCU deal affect way you deal with Comcast (CMCSA)?

Murdoch: It won’t. We’ll be competitors with NBC as broadcasters and partners with Comcast when it comes to cable.

Question: What’s up with plans to erect some sort of paywall at all News Corp. newspaper sites in 2010?

Murdoch: “We’re all working very hard on this, but I wouldn’t promise that we’re going to meet that date…it’s a work in progress, and there’s a huge amount of work going on.”

Question: Is WSJ profitable?

Murdoch: “Yes. Barely. But Yes.” How did you do that? “We produced a better newspaper.”

Question: Please talk about digital/MySpace some more.

Carey: Going to repeat what I said already, basically. “We’re in state of transition…work in progress.” Can’t tell you what it will look like in 12 months because I don’t know. “Work in progress.” “Work in progress.”

Question: Google promised you $900 over three years. How far short will you fall?

Murdoch: “I don’t know. But it will be a real figure….It will certainly drop by $300M.” Carey or DeVoe corrects Murdoch, noting that it will be closer to 10 percent. I’ll ask News Corp. PR for a ruling and get back to you. UPDATE: Ruling from News Corp. PR–MySpace will be about $100M short on its Google payment for this year.

Alas, the Foursquare conference, hosted by the Quadrangle PE fund, is an invitation-only affair. And the event, which kicks off tomorrow, is closed to the press except for reporters onstage to interview the stars. And those conversations don’t get released to the public.

That’s a particular bummer this time. Because the Quadrangle guys–who have had a rough year–had the foresight to get a lineup that includes GE (GE) CEO Jeff Immelt, who appears to be in the final stages of selling NBC Universal to Comcast (CMCSA) CEO Brian Roberts, who will also be onstage. Sure would be nice to hear what they say.

Another panel that piques my interest, if only because of the title: “Are Popularity and Profitability Correlated?” It features Twitter’s Stone, LinkedIn founder Reid Hoffman and YouTube co-founder Chad Hurley. And would-be moguls are represented by a start-up pitch panel that includes Dennis Crowley of Foursquare, the superbuzzy mobile service whose name has nothing to do with Quadrangle’s conference.

So once again, here’s the complete list of those you won’t be hearing from this week as they gather at the Plaza in Manhattan. Unless, perhaps, one of my more ambitious colleagues sneaks in–I’m thinking of you, Bobby MacMillan–and gets us a first-hand account.

2009 SPEAKERS
EMILIO AZCÁRRAGA President, Board of Directors and CEO, Grupo Televisa
DENNIS CROWLEY Co-Founder, foursquare
BARRY DILLER Chairman and CEO, IAC; Chairman, Expedia, Inc. and Ticketmaster Entertainment, Inc.
BRIAN DUNN CEO, Best Buy
CHARLES FORMAN Founder, OMGPOP
REED HASTINGS Founder, Chairman and CEO, Netflix
REID HOFFMAN Executive Chairman and Founder, LinkedIn Corporation
CHAD HURLEY CEO and Co-Founder, YouTube
JEFF IMMELT Chairman and CEO, GE
PAUL JACOBS Chairman and CEO, Qualcomm Incorporated
OLLI-PEKKA KALLASVUO President and CEO, Nokia
JASON KILAR CEO, Hulu
LESLIE MOONVES President and CEO, CBS Corporation
ANNE MULCAHY Chairman, Xerox Corporation
JAMES MURDOCH Chairman and Chief Executive, Europe & Asia, News Corporation
BRIAN PHILLIPS CEO and Co-Founder, Thread
DAN PORTER CEO, OMGPOP
BRIAN ROBERTS Chairman and CEO, Comcast Corporation
PAUL SAGAN President and CEO, Akamai
ERIC SCHMIDT Chairman and CEO, Google
IVAN SEIDENBERG Chairman and CEO, Verizon Communications
BIZ STONE Co-Founder, Twitter
HOWARD STRINGER Chairman, CEO and President, Sony Corporation
BEN VERWAAYEN CEO, Alcatel-Lucent
DAVID ZASLAV President and CEO, Discovery Communications

MODERATORS
MARC ANDREESSEN General Partner, Andreessen Horowitz
KEN AULETTA Author and Writer, “Annals of Communications”, The New Yorker
MARIA BARTIROMO Anchor, Closing Bell; Host & Managing Editor, Wall Street Journal Report, CNBC
JAMES CITRIN Co-Leader, Board & CEO Practice, North America, Spencer Stuart
DAVID FABER Anchor, Reporter, CNBC
MICHAEL HUBER Co-President and Managing Principal, Quadrangle Group
BECKY QUICK Co-Anchor, Squawk Box, CNBC
GEOFFREY SANDS Director & Leader, Global Media, Entertainment & Information Practice, McKinsey & Co.
JOSHUA L. STEINER Co-President and Managing Principal, Quadrangle Group
GEORGE STEPHANOPOULOS Anchor, This Week; Chief Washington Correspondent, ABC News

Perhaps plow it into more start-ups like Aviary, a Long Island-based design software company.

Bezos, via his Bezos Expeditions fund, has followed up an investment in the company earlier this year with another slug of cash. It’s part of a $7 million Series B round led by Spark Capital, best known in these parts as the guys who made a very big bet on Twitter, which Bezos also invested in.

If you’re sick of hearing about Web start-ups with just the vaguest sense of a business plan, Aviary may be a refreshing change. It is trying to make money by selling cheap, Web-based alternatives to popular, expensive design software, primarily the stuff that Adobe (ADBE) sells, like Photoshop and Illustrator. Granted, it doesn’t make much money yet: The company only began selling $24.95 subscriptions to its software suite earlier this year.

Down the line, Aviary also imagines it will be able to create an online marketplace where the creative types who use its software can bid on work assignments. Sort of like eBay (EBAY) meets Craigslist meets Etsy meets Amazon’s (AMZN) own Mechanical Turk.

Here’s the full press release:

Aviary Secures $7 Million in Series B Financing Led by Spark Capital

Provider of Creative Application Suite in the Cloud Makes Creation Accessible to All and Advances the Growing Digital Economy

LONG ISLAND, New York (October 26, 2009) – Aviary, Inc., a pioneer of a creative application suite in the cloud, today announced that it has received $7 million in Series B financing led by Spark Capital, with participation from existing investors, including Bezos Expeditions, a personal investment company of Jeff Bezos. With a suite of digital creation and editing software available as an online service, Aviary offers a simple and cost-effective solution for creators of all genres–from graphic design to audio editing – to express their creative talents and participate in the burgeoning market for digital goods. In conjunction with the investment, Mo Koyfman of Spark Capital will be joining Aviary’s board of directors.

“Aviary’s robust suite of online creative tools is fundamentally democratizing digital creation. Whereas the market for digital goods was once reserved exclusively for creators using proprietary desktop software, Aviary is delivering creative applications that allow anyone with a browser to participate,” said Koyfman. “And by doing so in the cloud, Aviary allows for seamless online creation, collaboration, distribution and ultimately monetization previously not possible. The Aviary model has the potential to exponentially increase the number of creators and collaborators contributing to the digital economy.”

Until now, the digital creation market has been largely dominated by desktop software solutions which are often cost prohibitive and involve complicated interfaces. By contrast, Aviary offers a powerful creative toolset in the cloud that enables professional and amateur creators alike to easily create their own digital works. The basic Aviary suite is available for free to users and includes an image editor, vector editor, audio editor and more. Users can also upgrade to the pro suite to gain commercial features such as unlimited private storage, as well as collaboration and community enhancements. For more information, visit http://aviary.com/.

“We are disrupting the status quo by eliminating the long-held barriers to digital creation and giving creators the tools they need to create, market and monetize their vision,” said Avi Muchnick, founder & CEO of Aviary, Inc. “We are extremely excited to have Spark Capital on board. Their broad-ranging internet, software and consumer experience will be a tremendous asset to us in furthering our mission to make creation accessible to creators of all genres.”

That’s the core of Twitter’s pitch, of course, and it has helped the microblogging service raise $155 million, a $1 billion valuation, and forge partnerships with Google (GOOG) and Microsoft (MSFT). Not surprisingly, investors are looking to place money on related bets, from search engines that parse real-time data to location-based social networks with real-time updates, and even real-time photo-sharing sites.

The newest entrant: Hot Potato, a buzzy start-up that’s supposed to let users converse about a particular event, whether they’re attending it in person or watching from afar. When it’s up and running, that is. The five-man crew doesn’t have users or a product just yet.

But that hasn’t prevented the Brooklyn, N.Y-based company from raising about $1 million, sources say, in a round led by First Round Capital and RRE Ventures. A group of smaller investors, including Betaworks, the incubator that specializes in real-time companies, and Ron Conway, the angel investor best known for his Google bet, are also backing the company.

Hot Potato is led by Justin Shaffer, an eight-year veteran of Major League Baseball Advanced Media, pro baseball’s well-regarded Web unit. Shaffer has recruited three other MLB.com employees (one of whom subsequently left to get an MBA at MIT) to join him.

Shaffer wouldn’t comment about his funding round, but was willing to discuss his start-up’s general plans. They are finishing an iPhone app and plan to submit it to Apple (AAPL) in the next few weeks, he said, and will open their doors once that’s approved.

The big idea is an interesting one. People are already using Facebook and Twitter to converse about events in real time–think about Barack Obama’s inauguration, or Balloon Boy, or last night’s Yankees-Angels game.

Shaffer’s critique of those platforms, though is that “they break at scale–there’s no good way to filter the chatter so that  you, your friends, and a group of strangers with something relevant to say can all connect. Hot Potato, he says, will offer a “curated stream” in real time of all the data coming out of the event in real time. What we’re really focused on doing is bringing together the entire audience of an event, whether they’re at the event or watching at home.”

Business model? TBD, of course. But there are a couple of obvious ways to go. For instance, Shaffer thinks people who opt-in to a particular conversation–say, about an NFL game or a U2 concert–would be okay with seeing “in-stream” ads, as long as they were relevant.

But that’s a problem that’s best tackled once the service is up and running. We’ll check back then.

But we’re not exactly right. New statistics from the Pew Internet Project indicate that 19 percent of U.S. Internet users are on the service on a regular basis. To spell out the obvious: One in five is a lot of people, but it’s not everyone.

This is worth remembering as Google (GOOG) and Microsoft (MSFT) move to integrate Twitter updates into search results: Those results come from a particular slice of Web users.

Here’s Pew’s breakdown of that slice, by gender, race and other demographic markers:

Pew says the average age of a Twitter user is 31 (MySpace, 26; Facebook, 33; LinkedIn, 39). And it has some other stats that are useful–and, if you use the service, evident.

For instance, Twitter and mobile are a peanut butter/chocolate combination–25 percent of Internet users with wireless access use the service, compared with eight percent of those who are tethered. And, not surprisingly, gadget junkies are Twitter junkies too: 39 percent of Web users with four or more Internet devices use the service, compared to 10 percent with one device.

The full report is embedded below:

PIP-Twitter-Fall-2009 –

Hi Peter,

My name is [Redacted] and I’m working with the ad:tech team on the social media outreach and promotion for ad:tech New York. ad:tech recognizes that you are a key influencer in the digital marketing community, and as such, I’d like to see if you are interested in a promotion exchange.

ad:tech will provide:

• Twitter announcement of your involvement with ad:tech New York to our 6,800+ followers.
• Your choice of: a free pass to the exhibit hall (valued at $35) or 35% off a full conference pass.

*If you are already registered or can’t make it to the event, you can offer it as a prize to your network, give it to a friend or client….It is completely transferrable.

We ask you provide:

• No less than 3 posts about ad:tech New York on Twitter, Facebook or your blog. Suggested postings: a session you’re interested in, why you like ad:tech, the exhibitors that you want to see or technologies that you are interested in learning about. What you share is up to you–it just needs to be posted by November 1.

Interested in writing a blog post and would like additional information on ad:tech? Quotes, photos, interviews, ideas, etc. will happily be offered with request.

To redeem the offer:
Share 3 posts about ad:tech, then email me, [X]@ad-tech.com, with links/screenshots by November 1.

• Tell me how you’d like ad:tech to promote your involvement with the event at the show.
• Let me know if you’d like the free expo pass or the 35% discount on the conference.

Please let me know if this is something that you are interested in or if you have any questions?

Thank you for your continued support of ad:tech. I hope to meet you in New York!

[Redacted]
Social Media Outreach
ad:tech

Well. Flattery is always a nice approach, so I’m pleased to hear about my influencer status. Also, it’s nice that the ad:tech team is willing to provide “ideas” for me upon request.

Alas, even if I wanted to take ad:tech up on its offer, the Dow Jones Code of Conduct would prevent me from doing so.

But this letter does generate two questions for me:

• Is my work nearly worthless? Or pretty valuable? Three posts is a little less than a day’s work for me. Ad:tech says that’s worth either $35 (a free expo pass) or up to $558 (35 percent of the highest price for an ad:tech conference pass). That’s a big swing!
• I know there are a lot of “social media experts” out there, because there are a lot of them following me on Twitter. But I don’t really know what they do. Is this it? That can’t be right. Can it?

Anyway, this kind of thing always makes we want to pull up a “Glengarry Glen Ross” clip. There isn’t a direct connection, mind you. Just a vibe.

I’ll spare you the details, but suffice it to say that Twitter has replaced a cumbersome and completely nonintuitive process with one that makes more sense. That’s good, right?

The flip side is that spam really isn’t one of Twitter’s most pressing problems.

In fact, Twitter’s antispam qualities were one of its best features from the very start: “Spam” on Twitter isn’t like other services’ spam since no one can actually send you spam and clog up your inbox. You only see it if you’re gazing at messages that include your name. So it’s aesthetically offensive, but not the kind of thing that actually makes Twitter less useful.

In the more proactive category: Twitter’s “lists” feature, which curates interesting groups of Twitter users to follow, should debut next week, I’m told. This one does tackle a more significant problem for Twitter: New users come to the site and have no idea what to do or whom to pay attention to. (Twitter’s quasicontroversial “Suggested Users List” doesn’t really cut it, though it does drive Robert Scoble nuts, which is amusing.)

And in the time-to-get-serious category: Actual revenue generation. Twitter’s giant cash pile means the company doesn’t have to start making money anytime soon. But it’s going to start trying, I’m told, with a series of…well, I heard them described by someone familiar with the company’s plans as “experiments.” Alternate name for them: “Don’t freak out if this stuff doesn’t work.”

We already know what one of them is: A plan to sell both Google (GOOG) and Microsoft (MSFT) access to Twitter’s data stream. But I’m told we should see other kinda-sorta trials in coming months.

Unless the 400 or more people I follow on Twitter have all gone mute at the same time, I suspect that something’s wrong with Twitter, since I haven’t seen a new message for the last hour or so. A quick scan of Facebook–and Twitter’s own search engine–indicates that other people are seeing the same thing: We’re tweeting, it appears, but into a void. How meta!

Twitter’s status site, designed just for instances like these, has a message it says is 16 hours old: “We’re currently diagnosing the causes of an unplanned site outage that happened a few minutes ago. We are recovering from this issue now and apologize for the interruption in service.”

Twitter now acknowledges there is a current problem: “We are currently investigating a problem causing many users’ timelines to be delayed. We will update with status here shortly.”

I’m confident we’ll survive this crisis if we all band together. And perhaps go out for a walk–it’s really nice today in New York.

The semi-serious point here is that this stuff used to happen to Twitter all the time, and happens much less now. But the pressure is on Twitter–users are increasing, and so are expectations–to make these outages even less frequent.

Counterpoint: Even mighty Google (GOOG) is prone to this kind of thing.

Schmidt added a bit of nuance to that message today, noting that the company had been surprised to see its European business bounce back as quickly as it has. Here’s my transcript of his opening statement.

We are clearly seeing aspects of recovery, and what is notable is that we’re seeing aspects of recovery not just in the United States but in Europe. I had been in error in assuming that there would be a lag, that it would the U.S. first and Europe second. Asia, of course, was never significantly hit in the first place.

So that means from a Google perspective that…we never stopped hiring, but we told our team internally and again, we’ve said to many other people that we are increasing our hiring rate and our investment rate in anticipation of a recovery.

Schmidt and Google co-founder Sergey Brin covered a lot of ground in the hour-plus press conference, and I’ll try to go back and break out out some of the other highlights. A few items worth noting in summary:

• Brin expressed contrition over recent Gmail outages and said the company was working both to prevent future failures and to react more quickly if and when they do happen. But he reiterated the argument, common among cloud-computing fans, that conventional email systems fail much more frequently.
• Schmidt repeatedly defended the proposed settlement Google had reached with authors and publishers regarding its book archive. Recurring theme: It’s not a perfect settlement, but it’s workable.
• Schmidt stressed the importance of porting Google’s Chrome browser to Apple’s Mac platform and said this would happen within months.
• Schmidt said Google was working on ways to help publishers sell their work on the Web (via one-offs or subscription). But he said he had no interest in promoting one publisher’s results over another, as Associated Press officials had recently suggested: “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.”
• Schmidt, who’d previously noted that he expected Google to start making an acquisition per month, said that these would likely be small, five-to-ten-person companies. He added that it was unlikely the company would be in the market for something the size of a YouTube acquisition, which cost Google $1.65 billion. Translation: Don’t expect us to pony up billions for Twitter.

Earlier: My live coverage of the press conference:

Google (GOOG) co-founder Sergey Brin is sitting down with about a dozen reporters in Google’s New York City headquarters for a Q&A session. Tune in for live coverage. This should be a wide-ranging conversation, which I’ll attempt to cover live as well as I can. Please consider everything below to be a paraphrase unless it’s in quotes.

Brin is joined by Google CEO Eric Schmidt. Brin gives an unofficial intro.

Schmidt adds his own informal introduction.

Schmidt: We’re here because we have a global sales meeting in New York, and we’re winding that up right now. A series of internal talks, and the mood was “very, very positive.” We told them that “the worst is behind us” (which Schmidt has said before). We’re seeing recovery not just in the U.S., but in Europe as well. I had been in error in thinking it would be U.S. first, then Europe second. Asia is less important, obviously. We’re increasing our hiring rate and investment rate in an anticipation of a recovery.

Brin discusses some tweaks to search. Do you feel that Microsoft’s innovations with Bing will cause you to accelerate your innovations?

Brin: Competition is healthy. Microsoft (MSFT) has made its contributions. So has Cuill. Many of the tweaks in Bing we’d already seen from Microsoft Live earlier in the year.

Schmidt: I agree!

But do you think Bing is really different? Or just a rebranding.

Brin: [Demurs]

Schmidt: You guys should judge us and our competitors. We’ve been criticized for having a self-referential view of the world. But I’d argue that our success so far proves that’s been a good strategy.

Please talk about Android and other mobile plans.

Brin: We started with Android because it was a problem for us, as an end-user and a developer, that phones lacked powerful browsers and the ability to install powerful apps. I think Android has addressed this very well, but it has also pushed the market. It has pushed Apple (AAPL) with the iPhone and RIM (RIMM) and Windows Mobile. I’m pretty excited about the future; they’re getting increasingly capable browsers, and you can now write native applications across five platforms that will cover most smart phones. I think that having the software platform has freed the hardware makers from spending time on that, and they can rejuvenate their efforts on hardware.

Please talk about enterprise efforts.

Brin: We started in enterprise, like mobile, to address our own needs. When we started with mail in ‘04, Web email was like a toy. We really focused on something that would work in an enterprise and then made it available to consumers. We feel we’re farther ahead (than competitors) both in email and in collaborative document-editing. We’re moving toward eventually having everything (all our applications) available everywhere. “I just think the cloud model is a better model….I do think this install-less model of a cloud is better….It’s definitely made me more productive.”

More on enterprise from Brin: We’ve been successful with both SMB [small and medium business] and increasingly with enterprise. We’ve got a big implementation with Genetech (DNA), and in Washington D.C. We’re specifically adding features for enterprise. That’s part of the Postini acquisition–to add some of those email features for enterprises. You’d be surprised to hear some of the things businesses ask for.

Please talk about recent Gmail outages.

Brin: Certainly we’re not happy with any outages. With those outages we’re at the “three nines” level, which is not where we want to be. Targeting “four nines” by end of quarter. We’ll let you know how we do. Focusing not only on outages, which we don’t like, but recovery time. Second outage could have been resolved in five or ten minutes, but we made errors in handling it, and it extended over an hour. But if you look at a typical enterprise today, those outages tend to add up to more than even these kinds of outages that we had in Q3. Also, we’re working on the number of people affected by outages. Trying to group people into pods so that if one goes down it doesn’t affect others.

You’re adding more complexity to search. It’s more confusing than it ever was. Same thing with site links. Is that an issue (it is for Danny Sullivan)?

Brin: I’d like to see all the options, available in all the corpuses. We don’t have all the same options in each offering. In terms of the links and snippets that we’re offering, we’re trying to experiment with that.

On Google book deal: If the judge asked you why he shouldn’t be concerned by the concentration of Google’s power, what would you say?

Schmidt: It’s an error to answer a theoretical question from a journalist. But anyway, we won’t get that kind of question. With respect to book search, we were doing something that we thought was appropriate. We were sued, and after three years of discussion, we’ve come to a settlement. This is perfectly normal. From our perspective, this is a settlement we like, it’s a settlement we think they’ll like, and we’ll hear what the court says, within minutes. Let me reframe your question: There’s nothing particularly exclusive about what we’re doing. The rights registry we’re doing is for the benefit of orphan works. “It’s not a particularly good business for us. We’re going it because we think it’s the right thing to do.” We don’t think the settlement is perfect, but we think it’s good.

What are plans to expand book search?

Schmidt: We’re already huge. There are millions of books that have never been read, and we’re going to deliver readers to those books.

Brin: We want as many works as possible in some form, because that’s of tremendous value.

Schmidt: This doesn’t cover all international books, all books in the world. [Some disagreement about this between Brin and Schmidt]. It will take time to get the registry up and running, so for the near future I think that’s all we can achieve.

Back to the economy, please.

Schmidt: We’ve tried for a while to figure out if Google is an accurate predictor of the economy, and we can’t prove it. If we could, we’d brag about it. Last early in the year we saw a decline in U.K., which surprised us. From our perspective, the low point was somewhere in the spring. Which is why I said worst was behind us in May, June. We noticed a recovery “June-ish.” The conventional wisdom is that U.S. recessions are 18-24 months. Bernanke sees a recovery too, which we agree with. Conventional wisdom was that Europe would lag by three-five months, which we’re not seeing. Europe is not one country, and it varies a great deal depending on which country we’re in. I won’t go in to specifics but it’s the obvious stuff–the countries that didn’t have a big bump did not have a big fall. More on being a leading indicator: Obviously we’re a leading indicator in advertising.

Brin: And we’re good indicator for consumer spending, and you can see for yourself by looking at Google trends.

It seems as if Chrome isn’t having the impact with consumers that you would like.

Brin: [Starts, then stopped by Schmidt]

Schmidt: Some of your premise about Chrome is incorrect, in terms of adoption, and we’re going to get that message out.

Brin: It’s actually exceeding our benchmarks.

Schmidt: I see a lot of Macs in this room, and a lot of very sophisticated people are using Macs now and we need to get a version of Chrome out for that, which we’ll have in a couple of months. Key to browser strength is speed. In general, we announced Chrome OS and Chromium product. Everything is linked together: Cloud, chrome, etc.

At one point do Android and the Chrome OS come together or not come together?

Schmidt: Current definition of use platforms has to do with use patterns. Android for mobile, delivered via telecom store, heavily integrated with telco offerings, like our Verizon (VZ) deal, which we’re enormously excited about. The analog for Chrome is that it’s designed for a 10, 12-inch form factor. They both use Linux, etc. But they’re designed for different uses. [Netbooks?] May be some overlap there.

Is Google being too nice? Is there a rethinking of relationships with aggrieved groups?

Schmidt: In many ways we’ve always wanted to be this Google as opposed to the way we were perceived a few years ago. We’re particularly proud of the way we’re working with advertising agencies, which is very important to us. With the media industry, we’re having success with YouTube and YouTube monetization, and we’ll have more on that coming forward….”We have always wanted to have these partnerships….We’re learning how to do them in a way that they win, too.”

Brin: People can now differentiate between us and the Internet.

Schmidt: Google is an innovator. The Internet is causing collisions. Innovation plus collisions equals opportunity. For instance, the fact that Verizon has embraced most of the open principles that we put forth five years ago is shocking. “It’s pretty amazing. This is Verizon. It’s not some itty-bitty telecom start-up.”

Are you uncomfortable with Google employees’ sense of entitlement? [Per new Ken Auletta book]

Brin: [Refers to layoffs--Schmidt corrects him: "We did not have layoffs."] [Addendum: Schmidt was talking about Google closing engineering offices in Phoenix and other locations; Google did have layoffs last winter.] You’re right:

What do you think about publishers requiring pay walls, and how will you help surface that.

Schmidt: We’re starting with that YouTube. Overall, “there’s clearly a market for free content, and that market is the size of the Internet.” Also a market for subscription/paid. The analogy I would offer is TV. We all grew up with “free” TV. Now almost everyone pays for cable, and some people pay for pay-per-view, “which is ridiculously expensive,” but people will pay for particular events, like boxing. I think all three of those uses will emerge. We’re working on payment models, subscriptions, to enable that.

But what about surfacing paid content in search [this comes from WSJ.com editor Alan Murray]? Will you factor the desire of someone to pay for content into results?

Schmidt: We’re not going to use the price you use as our ranking in results. That’s not going to be our signal. But we’ll incorporate the price people are paying for your content into results. But I’m not going to answer this precisely because I don’t want to discuss how we produce results. The most interesting improvement you could make is that to the degree that we have more of the marketplace data available, we could take that information and reflect some of that in our rankings.

The AP CEO said Google or Microsoft might be willing to pay a premium for an advance look at the news.

Schmidt: We have a deal with the AP, and I don’t want to talk about any specifics of any deal. I don’t think that’s proper. “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.” We are staying out of the media business. “You guys are very good at it, and we’re not.”

[Apologies for tech error; I missed the specific question and part of the following exchange, but the subject is entitlement.]

Brin: We cut down on snacks, etc. to “reset expectations” regarding entitlement.

Schmidt: “Google pays very well. Google is clearly a growth company. People at Google don’t work for those reasons at Google. We don’t want them to come to work for Google for those reasons. We want people to come to Google to change the world. Life is short.” The tightening in the last year has been good for this, by the way, the controls put into place by Patrick Pichette, who is our hero, have been very helpful.

Please talk about M&A plans and goal of one acquisition per month.

Schmidt: That’s been our historic pattern. I think we will be buying small companies–five, ten people. That’s where some of our best stuff has been. One day Larry and Sergey bought Android, and I didn’t even notice. Think about the strategic opportunities that has created. Sergey found Google Earth one day while he was surfing on the Web. And then he walked into my office and told me he bought them. “And I said, ‘for how much, Sergey?’ And it turned out to be a few million.”

Would you buy a YouTube?

Schmidt: Is there another one to buy? The problem with that size of acquisition is that you have to make your money back. I think that DoubleClick and YouTube will be two of our best acquisitions. DoubleClick is already close to paying back, and YouTube will get there soon. But bear in mind that any major acquisition now will involve a regulatory review, because of our size and because our competitors will make sure of that.

[Sorry, missed another question]

Do you anticipate making large upfront commitments for new or renewed search deals [as you did with MySpace and AOL]?

Schmidt: I’d rather not comment on search deals. We are in discussions with both of those companies. “Some of our best friends are in those companies.”

[Missed yet another one]

What will new tablet machines [like Apple's] mean for you? And to content producers?

Brin: Hardware is getting amazing with regard to cost. Used to be that display was expensive. Now that’s cheap, and so are chips, etc. Now, the main cost is broadband connection, or cellular, or however you get to the Internet. That’s why wide broadband availability is important to us. Think about how much you spend on access costs compared to the amount you spend on your handset. The phone cost is negligible.

Schmidt: Not sure how to answer question. We provide the infrastructure below what you’re talking about [touch interfaces, etc.]. Kindle is a good example. Don’t think about current one, think about one two or three years out. I think there will be many kinds of things like Kindles, and that’s a material change in the way people will interact with hardware, media.

Brin: I think it’s better if hardware isn’t locked down to specific platforms.

[Long exchange between Schmidt and Danny Sullivan that I'll have to pick up later]

Should Google be required to lease servers and access to Google checkout numbers to deal with “lock-in” issues that broke up the telcos?

Schmidt: Google Checkout isn’t interesting. But I think your analogy is wrong and that there are no data to support your theses.

[I missed the next question on the book settlement about orphan works, etc.]

Schmidt: A lot of these complaints are being made by people who don’t want a solution.

What are the reasonable book settlement proposals you’ve seen?

Schmidt: Goal is to get all the books to everyone and to get all the authors compensated properly. Some of the proposals make sense to me, but I don’t want to characterize them. Not a perfect solution, but the best one we can do.

How will book settlement affect international users?

Brin: It won’t. We’d love settlements that work across a range of countries.

Why won’t you be like Microsoft with regard to antitrust?

Schmidt: Many reasons. Culture, for one. Another reason is that majority of users are one click away from moving away from us. Third: If we went into an “evil room” and had an “evil light” shined on us, and we then behaved in an “evil way” we would be destroyed….There is a fundamental trust between Google and its users.”

Schmidt walks through “ludicrous” thought experiment whereby Chrome takes 80 percent of market share and then tries to lock consumers in, noting that it wouldn’t work due to open source.

Do you think you’ll take another stab at moving into radio, print?

Brin: We are quite optimistic on the TV front. Radio and print didn’t pan out as well as we thought initially. One of the reasons is that those mediums are moving online and consumers are moving online and the publishers/producers want to work with us there. “We were kind of at the dock where the ship had already left.” But TV is quite similar to the Web in terms, potentially, of measurability, so we’re excited about those prospects.

Is page rank broken? People are gaming it, etc.

Brin: No. We have to continually develop. Part of the issue is span, but the main issue is that everything changes. We’re doing a much better job of ranking than we did a decade ago. If we just rested on our laurels with what we wrote in paper from 1998, we’d be in big trouble.

Union Square was the lead investor in Twitter’s first funding round in July 2007, and participated in subsequent rounds in May 2008 and February of this year. In that last round, Union Square said it was re-upping “to maintain our ownership position.”

What happened this round?

Union Square partner Fred Wilson, who is a Twitter board member and a tireless Twitter advocate (and Twitterer) declined to comment. So I’ll hazard an Occam’s Razor guess: The $1 billion valuation that Twitter achieved in this round priced out Wilson’s fund.

If that’s the case, it’s a high-class problem to have. Union Square is a relatively small venture player (the two funds it manages have a total commitment of $281 million). It specializes in early-round investing in which the bets are comparatively low stakes–a few million dollars here and there. If things go well, those bets are enough to get the company to an exit–in the old days, that meant an IPO, these days, a sale to Microsoft (MSFT), Yahoo (YHOO) or Google (GOOG).

But as the valuations increase, so do the amounts a start-up’s investors need to pay to keep their ownership stake, which is why angels and other early investors usually drop away. A player Union Square’s size can play up to a point, but then has to step aside or it would end up with most of its portfolio invested in a single company.

In order to re-up at this level, Union Square would have needed to make a much larger bet than it is used to making, and perhaps more than it is able to make. The new round, which raised $100 million, is nearly twice as much as the $55 million Twitter had raised to date. Which means Union Square’s bet would likely have to double as well.

[Image credit: Steve Jurvetson]

The perennial, and obvious, solution is to incorporate ads into the service, but so far Twitter hasn’t tried it, except for very limited experiments.

The good news for Twitter and its investors is that the service’s user base is pretty receptive to advertising, in general terms, because it’s pretty receptive to just about everything on the Web.

So says research group Interpret LLC, which has a new study out today, conveniently enough. From the release:

Twitter users are twice as likely to review or rate products online (24% vs. 12%), visit company profiles (20% vs. 11%) and click on advertisements or sponsors (20% vs.9%) as those who only belong to traditional social networking websites like Facebook and MySpace. The data suggests that Twitter users uniquely demonstrate higher engagement with brands, not just with “tweets” they post.

These statistics are self-reported, and Interpret doesn’t say how big a sample its survey used, so take them with as much salt as you like. But they seem intuitively and directionally correct: Anyone willing to plug into the waves of information that Twitter pumps out is likely engaged all over the Web.

Note what the Interpret report doesn’t say: That Twitter users are eager to have ads inserted into the service itself.

Doesn’t matter. At some point, they’re unlikely to have a choice about that because it seems hard to imagine that Twitter can ever deliver on its investors’ sky-high expectations without generating some kind of money, somehow, from Madison avenue.

Which is exactly why Biz Stone and crew, who once made a point of expressing their derision for ads, now make a point of saying that ads may not be such a terrible thing, after all.