01/11/2012 Newsnight


In-depth investigation and analysis of the stories behind the day's headlines with Gavin Esler.

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Tonight, a Newsnight investigation into some of the world's most


successful companies. Companies who appear to make massive profit in


Britain, but pay very little tax. # I'd like to buy the world a coke


# And keep it company Companies such as Coca-Cola are


doing nothing illegal, of course, but is it immoral. It is


irresponsible, unethical and unacceptable. There needs


substantial reform to bring our business tax system up-to-date, as


it should be. I will ask the Treasury Minister, David Gauke, why


the loopholes can't be closed, and whether smaller British companies


are put at a disadvantage. The comedian, Freddie Starr, is


arrested by detectives investigating the Jimmy Savile


abuse claims. He becomes the second celebrity to face questioning, as


the police investigation turns the spotlight on those still alive. We


will have the latest. And with social media sites


sweeping in and sometimes out of fashion, we ask the founder of


Tumblr, what is so different about his site. It can be this really


delightful surprise when you bump into some stranger on Tumblr or


anywhere on the Internet, who cares about the same stuff that you do. I


don't think it is narcissistic, I think it is a whole new opportunity


for humans to socialise that hasn't existed before.


Good evening, one of the big priorities at the Treasury has been


in very hard times, new efforts to crack down on those not paying or


avoiding tax. One or two celebrities have been named, and


possibly shamed, but for many people, scandal is not -- the


scandal is not what is legal, but what is permitted -- illegal, but


what is permitted under the law. Newsnight's investigation has


revealed that some of the world's biggest companies apparently make


massive profits in Britain, but in some cases could pay as little as


2% tax. While smaller British companies have been paying


corporation tax at 26%. Nothing illegal in what these big companies


are doing, that is the point. Their iconic adverts have adorned


gable walls, bus shelters and TV screens for decades -- competing


for our attention in order to create and sustain global brands.


Which their owners know have a monetary and intangible value,


worth billions of pounds. But while the most powerful and sticky brands


openly talk to us, their corporate owners are much less open about


their tax affairs. But research by Newsnight seems to show that many


of the largest UK multinationals here are paying only a fraction of


the corporation tax that they might have paid. And it is perfectly


legal. Because large multinationals don't publish a figure for how much


profit they make in each individual country, we had to estimate it,


using extrapolate from the worldwide figure. If the global


profit margin is 20-30%, we applied that to UK sales, which is


published. That gives us a chance to estimate how much corporation


tax could have been paid if the full rate of corporation tax was


being paid, and of course, to compare that with the actual rate


of corporation tax that was paid. Needless to say the companies don't


like our methodology, and one company said it was completely


flawed, but it gives us a chance to compare and contrast. We looked at


the accounts filed at companies House by 19 of the best known


American multinationals, and found that the tax gap between what was


paid in corporation tax, and what could have been paid, amounted to


almostp �3 billion. The microchip maker, Intel, sits in most PCs and


laptop, last year it made �4 billion in UK sales, based on the


worldwide profit margin it could have paid �348 million in UK


corporate taxes, instead it said �27 million, a corporation tax rate


Coca-Cola is still the world and UK This is a former tax lawyer, and


now a Conservative MP for Dover, who has been campaigning for all


firms to pay their fair share in tax. Post 2008, the world has


changed. After the financial crisis, this playing the system is no


longer acceptable. It is not acceptable for people claiming


benefits, it is not acceptable for the super-rich. Everyone has to


play their role in ensuring we get the deficit down and repair the


nation's finances. The head of Google, they said we love you guys,


we will pay tax if we have to, we don't, so we don't. No firm wished


These firms are in good company, Starbucks, Google and Facebook, are


paying almost no taxes on their UK profits at all. The key to this is


something called transfer pricing, which allows one part of a company


to bill another part for using goods, and especially services. In


general, the bit of the multinational which controls


valuable brand trade mark or patents, bases itself in a low-tax


company like Luxembourg, Ireland, or Switzerland. From there it can


bill the British sister company, where taxes are higher, for


permission to use those trade marks or certain product. That has the


effect of magnifying the profits in the low-tax countries, and


minimising them in Britain. Finally, the profits left over in Luxembourg


or other low-tax country, gets sent back to the States were it can't be


taxed a second time. To prevent abuse, companies have to show the


relevant tax authorities that they are billing fairly. The rules


established by the OECD, even they admit that things are getting a bit


out of control. The concern is there has been a shift towards


aggressive tax planning, which may have been encouraged by the


Governments, let's be fair, but which now needs to be stopped. It


needs to be stopped with firmer rules which would be clearer, more


simple, but west which have to be implemented.


HMRC's new strategy is to man mark each of the biggest 2,000 companies


operating here. And they have recovered �29 billion above what


they would have otherwise got over the past few years. But that's


unlikely to assuage ordinary voters, who are paying more tax, while the


brands and the companies they love, might be paying much less.


The Treasury Minister, David Gauke, is here. This is legal, but it's


wrong, isn't it? Well I can't comment about individual companies.


Ministers don't get to see any of the confidential information HMRC


sees. If there is an abuse of the system, if businesses are


artificially diverting profit out of the UK, we expect to see HMRC on


the case, and indeed HMRC are on that case, we are strengthening


their ability to deal with transfer pricing, as Joe described it. What


I would say, having seen the report, we have to remember what


corporation tax is, it is a tax on profits from activity conducted in


the UK. It is not a tax on sales. It is not a tax on turnover. It is


a tax on profits in the UK. But if it's in the UK, it should be taxed


in the UK. But if a small company, a tea shop, would be taxed at 26%,


going down to 24%, corporation tax, some companies. And on to 22%.


companies are paying 2% or 3% or 4%, that sounds immoral? 2-3% on what?


I have to say having looked at the methodology, as it was explained


there, I'm not sure it is necessarily a fair one, but there


are others who can speak more about the technical details on it. Your


colleague seems to think it is immoral? It is not right if


companies are artificially lowering their profits so they end up paying


less in corporation tax. That is not right, that is why HMRC are


strengthening their ability to deal with that sort of behaviour, that


is why they have got in an additional �4.7 billion over the


last five years, specifically on transfer pricing. You at HMRC is


very complicated in the tax laws, what are you doing those who


transfer pricing, going to Luxembourg where there is a low-tax


regime, lower than the 22% we have here? You can't do anything? One is


about strengthening HMRC's capacity to deal with t they have got in


over the last five years �4.7 billion because they take a strong


line on transfer pricing. The second is working with other


countries, if we see profits being diverted to low-tax jurisdictions


or tax havens, clearly that is a concern. HMRC would consider that


to be a risk factor, we would want to address it. You said you can't


comment on individual cases, people understand that, when you have


somebody like Eric Scmidt of Google saying we would pay more if you


taxed us? The tax is on the activities they conducted in a


particular jurisdiction. If you have a business that actually, if


you like, exports its services or the goods, from one country to


another, it's taxed in the country in which it's in, rather than the


country in which its sales are done. That also benefits UK businesses,


who are based here and provide their services overseas, we get the


tax from those UK businesses. That's the way corporation tax work.


And actually, you are right to say that the UK can't unilaterally


change that, we would have to work with other countries to do it.


will leave it there, we are also joined by Bill Dodwell, head of tax


accountany at Deloittes. Maurice Lindsay owns a clothing website,


and we have a tax campaigner. How common is this, do big


multinationals naturally just take advantage of this? This all started


20, 30 years ago, when multinationals found it was more


efficient to run their businesses on a centralised model. So instead


of doing everything, in each individual country, they worked out,


if they had one big factory somewhere, and another factory


doing a different thing somewhere else, that would be a better,


overall result. It would reduce their costs, and it would drive


down and produce consumer benefit. Then when they came to look about


where to base their activities, they will lock at a whole range of


activities. They will look at have we got people here, have we got


killed people, do we have access to university research, for example,


what about the tax situation. They will look at all of those things


together, and make a choice based on that combination. Do you see


that this is, and could be unfair to smaller businesses, who can't do


that, who haven't got that reach, and they would find it very


difficult to compete against some of these big players? I think, you


will have to ask a smaller business soon. The question really is,


smaller businesses have different strength, and different things they


are good at. They are very nimble, they can move rapidly into markets


in the way businesses cannot. unfair Poppy? I think it is unfair


in terms of the economies of scale, it is not, you don't want to get


into an argument of David and Golaith, smaller companies have


advantages and disadvantages, as you have just said, but when I have


to spend money on accountant to obviously, as part of any business


strategy to keep their taxes low, but I'm not in a position to spend


millions of pounds protecting my position with Government, and


making sure that frg's protected. Presumably -- Everything's


protected. Presumably your accountant will minimise your


exposure to tax. You could conceivably, if you were bigger,


take advantage of it? There is an element is we are trying to talk


about what is morally correct in a capitalist world, but we are all


out to make as much money as possible in businesses. There is


that difficulty. But if you look at Starbucks assay they haven't made


profit, and comparing them similar companies who have made the same in


UK revenue, and the differences in what they have paid, it is


unbelievable. You have written a lot about this, what do you want


the Government to do? Well, I found it frustrating to hear David say


that he wasn't going to comment on individual cases, because that begs


the question, who is he working for, who is the Government working for?


You should be commenting on individual cases, should be telling


companies they should not be avoiding tax. I want to put this in


some kind of context. We are now seeing the biggest cuts we have


ever had in British history in public spending. People's lives are


really being damaged and destroyed by these cuts, and as it was


written in the Guardian yesterday, if all tax avoidance and evasion in


this country was tackled, it could pay off the entire budget deficit.


This is really immoral, that is the key. I'm sure many people will


agree but, with 20% of the cuts to the police and difficulties for


families up and down the country. What do you want the Government to


do about it, it is a very complicated position, 120 tax


treaties, they can't unpick all of it? What I find frustrating, this


myth that nothing can be done about it. There are alternatives out


there. There have been suggestions made, particularly by the tax


justice network, which has written a very extensive document on an


anti-avoidance principle. Saying what? It advocates an anti-


avoidance principle in the law. So companies would have to adhere to


the spirit of the law rather than the letter of the law. Which is


what the tax schemes essentially. Do the other things the Tax Justice


Network has advocated, is Government's refuse to give


Government contracts to companies that avoid tax. Those are very,


very good measures that should at least be looked at by the


Government. What about consumer boycotts, not going to Starbucks or


Coca-Cola if you feel strongly about it? I wrote about this, if


you, on a moral level, as I do, feel that this type of behaviour is


wrong, you should boycott it. However, I think consumer boycotts


have limited effect. What really needs to happen is a long-term


campaign against tax avoidance, that takes place in a variety of


ways, with a variety of taxes. Going with the spirit of the law


rather than the letter of the law. How would that work? Companies do


it here to the spirit of the law. We are about to get a general anti-


abuse rule, as well, brought into the UK, to prevent those very small


minorities who try to duck out of that particular aspect. I think the


issue we are locking at here though, isn't just about spirit of the law


and anything like that, it is about the fact that, in a globalised


world, it is open and sensible for multinationals to deliver a cheaper


service to their consumers, by basing their activities around the


world. That is where their choices come from. Starbucks or Coca-Cola


won't pull out of this country if they had to pay 24% tax rather than


4% tax, would they? I can't comment on their particular situation.


big companies that sell us stuff, are not just going to leave a


market and an important market like this? I'm sure that is absolutely


right for an important market like Britain. You have to think, where


do the profits come from. If you think about the US technology


companies in the news, of course, they are spending billions of


dollars developing their technology in the US, that really is the key


driver of their profits. Do you see any solution to this, Poppy Dinsey,


you are not going to drink cappuccino from tomorrow among?


can't get behind the boycotting idea, as a start-up entrepeneur, I


often have a three-hour gap between meetings, I will constituent in


Starbucks and pay �3 for a bottle of water and use the Internet for


two hours. Its hard work to be boycotting the majority of big


companies, and everything gets big, big becomes evil, this sort of


thing. I think loophole need to be closed, and you are always going to


try to pay as little as possible. Whilst you can, it is going to


happen. Do you sense the frustration that many people feel,


you are cutting the police budget, just to take one example, people


resent it and would like you to spend more money, and have more


money to spend. This would be potentially way of getting more


money? I can understand there's a frustration there. Indeed that is


the reason why we have reinvested �917 million into HMRC, and over


the course of this parliament, by the end of the parliament, they are


going to be getting an additional �7 billion a year, dealing with


avoidance and evasion. It is really important to get the tax due in. I


think the point I'm making is that, although there can often be


allegations about particular companies, I think it is right that


ministers don't talk about. That the sort of country that the amount


of tax that is paid is decided by what a minister says on the basis


of political matters, as opposed to what the law says, is not where we


want to be. Businesses can choose where they locate their activities,


not so much their sales, but their activities. We do want businesses


to locate here. We do want to be competitive here. All of that, but


we also want to make sure businesses pay the right amount of


tax. That is exactly what we are trying to do.


Next week the German Chancellor, Angela Merkel, will meet the Prime


Minister and top of the agenda will be what to do about the EU budget.


Both leaders want cut, but the ability of these two fiscally


conservative nations might be held back because Angela Merkel is at


the heart of the EU, and David Cameron, after last night's vote


about budget cuts, is seen as on the outer circle. How are Mr


Cameron's views considered by those he has to negotiate with on the


budget. There is one Brit who is still


popular in Europe. This week 007 was topping box-office charts


across the continent. Tough, powerful, in control. Just the


image the PM would like us to have abroad. It is one view of the


British. Here's another, as the new Bond film was released, Germany's


best-known news magazine was comparing us to the grumpy old men


in the Muppet Show. I think there's a "K" in knucklehead. The UK is now


just a spectator, it says, watching from the sidelines as a new


European Union is taking shape. Does that mean they are getting


better or worse! This is a sense that there's the people sitting on


the island, looking over, watching the continent, and not really


participating, more like observing and making mean comments. Trying to


sabotage, even, whatever is being done. David Cameron will soon be in


Brussels for another crucial EU summit. That word "crucial" is


often overused. After last night's vote, it is clear that negotiating


positions are hardening fast. And it's now a real chance, there will


be no budget deal in three weeks time. You know, now that we may be


seeing Cameron undermined at home, needs to push for a cut. There is


no willingness anywhere, Paris, Berlin, even some of the northern


European countries, which are traditional UK allies on the budget,


there is no support for that right now. If there is isolation before,


even increased isolation now. is this row really about? The


current EU budget of worth around �12 -- 126 billion euros in 2011,


the European Commission says that should rise to pay for EU


enlargement and new functions, like financial supervision. The UK


Government wants the budget to rise only with inflation. Labour and


Tory rebels want to go further with an actual cut. Everyone wants to


see a reduction in the EU budget, the negotiations have just started.


There are 26 other countries. We accept a deal that is not good for


Britain, we will only do a deal that is good for Britain. Last


night in a House of Commons be date on the budget...That Position on


the budget was backed by Nick Clegg today. But he made it very clear.


He will not support any further attempt to clawback wider powers


from Brussels. Europe is changing, yes. But rather than go into


retreat, now is the time to confront those changes head-on. We


theed to make a decision about who we -- need to make a decision about


who we will be in the new Europe. I say we need to be strong, loud,


present. All right, so an EU row might not be quite as exciting as a


Bond film, but this month's budget summit could be about as lively as


Brussels ever gets. He specially if David Cameron carries through with


that threat, to veto the whole deal, if he doesn't get his way.


mutual destruction that is going on here now, Britain is coming with


its veto threat, the response from the EU is OK, if you want to really


veto this, and make this go through the end of the year, we will force


you to pay more money than you would have with a budget deal. That


is the clash of interests that is happening right now. There is a lot


of fear that this November summit will be a real disaster, and lead


to a lot of problems for all member states involved. The stakes are


high, if David Cameron compromises on this budget deal, he risks


infuriating his own backbenchers. But if he sticks to his guns, he


could alienate most of Europe. We have the London correspondent, and


other our guests. Seen across Europe, particularly in


Germany, did last night's Commons vote really matter, did it filter


through? Yeah, I think actually it does matter. But I think it matters


for different reasons than generally reported, it won't change


much on the budget, there Nick Clegg is absolutely correct. But I


think the one thing that really is a game-changer, is Labour's


position. Because they now are starting to have a position. And


they are possibly moving into a rebel position. They are now


starting to consider whether it might be a better option for


Britain to leave the EU. The interesting thing about it is


there is a coherent and intelligence analysis about it. The


problem with Cameron's Government at the moment, they don't have a


position on Europe, they don't have a coherent position on Europe. On


the one hand, they say, OK, Europe should further integrate, on the


other hand they say they won't be part of it. What they don't think


through is Britain will be catapult today some second-teir position


they won't be able to live with. that context, won't be it very


difficult if Merkel and Cameron meet next week, they have a lot in


common about the way economies work, but they can't work together on


this? I say they could quite well, and I think they started to. I


think something has changed since last December. Last December Merkel


and Cameron also a week before Cameron vetoed, but the big mistake


he made, he didn't listen. He had, apparently, this obscure list from


his Treasury, he had a list of certain points that he thought he


could ram through. He didn't listen to the City, he didn't listen to


other countries, he only looked to his backbencher. That has changed.


I think he realises now that he has to make some deal with Merkel.


Merkel says, repeated low, she would like Britain to be a bigger


player in all -- repeededly she would like Britain to be a bigger


player in it all? I think she does genuinely want the British to be


there. For the simple reason you need more of a free market edge.


Firstly, because she agrees with that, and also because it is a


balance to the French and the people in the south. It brings,


from her point of view, the Nordic, and some of the easterners. I think


there is a role for Britain. But her tolerance for giving the Brits


a lot is not great. Where are the other British friends, I don't know,


the Poles, perhaps, the Finns? was the hope when in Brussels. A


year ago we kept on being told that Cameron really fought this country,


and lots of people would back him up, and they didn't. That is the


danger, from a mildly euro-sceptic point of view, it is getting to a


point where people begin to get very annoyed with Britain. Did this


really matter last night, or because of the reason Imke Henkel


said? That is very interesting, there is a real problem for Labour,


a short-term strategic gain, they beat the Government in a vote that


didn't matter. You are getting incredible reactions in Europe now.


Poor Douglas Alexander is deeply humiliated by Ed Balls. You have


seen the Austrian ambassador's text recent low, poor labour is now seen


-- poor Labour is seen as the anti- European party in Europe. Oddly, I


think Cameron is greatly helped by this. In what way? It is not a


defeat that has any consequence, or binding quality to it, I think he


came out of it very statesmanlike. He adopts a pragmatic position in


Europe. He will go there and negotiate. Do exactly what Ed


Miliband would have done if he hadn't gone on a tactical flip. It


is a wonderful moment. I would almost say that the revival of the


Tories on Europe, and towards the next election, started last night.


That is perhaps not entirely how you see it, can you see that


Cameron can say, you see what I'm dealing with at home, I have Labour


also saying this, you are better to deal with me? Merkel knows that.


That is not the point. The point is his difficulty, is he had listened


far too much to his people at home. He has to start to make alliances


across Europe, and there are quite a few states who would be


interested, or would have been interested, I'm not sure if they


are any more. I think the problem for Cameron really is, he hasn't


thought through his position. Labour hasn't either? I think


Britain is starting to. I think Labour's really starting to think


it through. They are very much at the beginning, but the Europe that


is now envisaged, with a core Europe, and other states around,


that will not work. I think there is a degree of opportunism, there


is a degree of opportunism, and Labour, it is naked and obvious,


they are doing something in order to carve out a position. I think


what's interesting about Cameron, is when he came in, when you talk


to the people in Europe, they repeatedly, when Cameron first


appear, they kept on talking about him being a "little Englander",


they saw the thing at Christmas last year as being frustrated. It


was just him trying to deal with his backbencher, as we saw this


time round. What is interesting, is he parked had himself, by doing


this thing straight up, by doing this thing about any cessation of


sovereignty, you have to be to have a referendum. Many wiser old men


said be careful on. That the reason it would be difficult going forward,


if there is a deal to save the euro it will be sovereignty going to


Brussels. That is when Cameron and Osborne might be prepared to go


along with t but the referendum will keep them in. In terms of the


friendlessness in Europe, in terms it of the Government, is it your


position, Peter, when Cameron talks about, or when Conservative


backbenchers have a vote, force a vote causing a toughening in the


British position, they are speaking for many German voters as well,


they are equally sceptical. Is that how you see it? What I think is the


other European leaders, we look at it in our parochial way, they are


very sympathetic, they have all got domestic issues. Angela Merkel has


issues. They see that Britain has a domestic issue, Cameron has the


management issue. I think also that when Cameron goes to Brussels, a


lot of -- with a euro-sceptic message there will be a lot of


European leaders quite happy to come in behind that cover. They


will be delighted today hear him say that.S Certainly true of some


German vote -- it is certainly true of some German voters? That is an


important point to make much the other importance of the vote


yesterday evening is it chimes with the sentiment around Europe, that


is the sentiment of the people. It is interesting, a German minister


today already react to it, not just saying there go the Brits again. He


said it would be more difficult, but he also said it is fantasy to


increase the European budget. final thought, just the thought of


another British veto, by theself would that be bad news, in European


eyes, if not domestic? I disagree with the other two on this. I think


within Germany there is a straight forward element to the populus fed


up with giving money to other people. That is there. The moment


you start testing it on the idea of people coming out of the European


Union, there you have a tougher thing, I think. It is a much more


solid, coherence around the idea of Europe. Once you get to play like


France and the others it is harder There have been further development


tonight in the inquiry sentering on Jimmy Savile. The comedian, Freddie


Starr, who has always denied any wrongdoing, and still does, has


been arrested. We have the details. What is going on? Starr who is now


69, has been arrested as part of operation yue tree, looking into --


Yew ld tree, looking into the investigation: it happened when


Karin Ward told the BBC that he had groped her when she was 13. He said


he never met her. But then footage emerged of them when he was hosting


on Clunk Click, with Jimmy Savile, but he admits he was wrong but says


he denies any wrong done. We should say that Miss Ward took part in a


investigation with Newsnight about Jimmy Savile that was not proceeded


with. Max Clifford is involved now? He has had phone calls from pop


musicians of the time who are concerned they might fall under


suspicion, simply because at some moment in the past they may have


encountered Jimmy Savile and young members of the audience on Top Of


The Pops. Everyone who has phoned me from the 60s and 70s, says they


had no knowledge or involvement in any shape or form, but, for example,


I was there doing Top Of The Pops, Jimmy Savile came up to me, with


some girls, will I have a picture I had a picture. There is a picture


of me, and him, with girls. I don't know their age. What he did with


them afterwards, before, I haven't got a clue. But you see how that


could now be damaging for me. other development, that Newsnight


investigation, which was dropped, we have heard a bit more about what


is happening about that? This is the Pollard inquiry, named after


Nick Pollard, late of Sky News. It has emerged that the inquiry has


asked some members of BBC staff for documents. It is also embarked on


what is described as an electronic search of archive documents,


presumably e-mails and the like. The inquiry will have a barrister


asking questions of the interviewees, and they, in turn,


will be allowed to have their own lawyers. The inquiry will be in


private, but its final report will be published. They hope that will


be before the end of the month. Remember Friends Reunited, it was a


social media darling for a while, and then fell prey to a new fancy,


called Facebook. In the world of social media one of the newer


success stories is Tumblr, like Facebook before it has become an


internet phenomenon. In a moment we will debate how far it is fashion


or the solidity of a new business model. Paul Mason went to meet


Tumblr's founder, the very successful, 26-year-old, Karp.


There is a joke on the internet, Facebook is how you would like


others to see you, Twitter is how you see yourself, and Tumblr


is...oh look, funny cat picture! If so, David Karp has raised a heck of


a lot of money on the back of funny cat pictures. The 26-year-old is


the boss of the hottest property on the net. I tried to set up blogs on


the big publishing platforms at the time. I tried to tweet, I used


flick flicker, and all the other things -- Flickr and all the other


things around, I wanted something to be more expressive and present


myself in a way that I was proud of. What is Tumblr, if you are asking,


you are probably over 24 years old, you express videos and other stuff


to express yourself. It sounds mundane, but it is given rise to


something called "curating", this year's buzzword. What is curating?


Even if you are the guy who isn't in front of the camera playing


guitar, you can still express a point of view and the things you


care about, through the stuff you select. On Tumblr you find users do


just pull stuff together and it expresses them? They do all of it.


We have millions of creator, people who make the stuff, they are


getting in front of the camera, taking the photos and recording the


songs. They are making the tough. Around that you have tens of


millions of curators, and channelling into the blogs they


care about, and the audience of 150 million people that show up every


month. 150 million is small stuff compared to Facebook with one


billion. But it is host to smaller users, nail art is one,. You don't


think there is a level of narcissism going on, you put your


favourite Barbra Streisand song next to your cat, who is


interested? The interest is really to have something out there for the


people who care. It can be this really delightful surprise when you


bump into some stranger in Tumblr or anywhere on the Internet who


cares about the same things you do. I don't think it is narcissistic, I


think it is a whole new opportunity for humans to socialise, that


hasn't existed before. Social media has come a long way. Smartphones


and tablets and all the other gadgets we are queuing up to buy,


have put the power to create original content in the hands of


ordinary people. And Karp has raised $125 million of venture


capital on the idea it all has to go somewhere. All of this stuff is


on the hardware. I'm so excited about Apple and Google today are


pushing the hardware so far, so quickly. As the creative horse


power in that hardware moves faster and faster and faster as it seems


to be right now, the software I think will just explode around that.


You are starting to see that. There is a whole ecosystem of these


favourite apps that are popping up. What I'm most excited about in


social media is all the stuff people are making. That includes


trouble. Tumblr's breakthrough moment came when Occupy Wall Street,


used it to tell the story of the 99%. This making Karp one of the


few capitalists whose eyes light up at the thought of anarchists


protesting. The 99% blog started on Tumblr, started to garner all this


attention and the events ultimately ended up being organised through


communication going on Twitter, people saying we're going here, and


the police are there, and we are going here now. The reach you can


build out of a network like Tumblr, and the mass communication that is


able to go down in a network like Twitter is incredible, something


that has never existed before. There is the communication, the


other end is just the media. It is easier than ever for you and me,


people who may not have been the ones going in there and making the


stuff. It is easier than ever for you and me to make something that


is really compelling, really tells a story, and put that out into the


world and really move people. is a dark side to Tumblr, not just


porn, but lots of references to teenage angst, self-harm, eating


disorders. And Karp does intend to make profits out of other people's


content, by the time honoured method. Our model is pretty simple.


We have all of this attention built off all of the great work that


these creators are making, attracting an audience of 150


million people, we are selling a little sliver of that attention to


marketers. Will it succeed? Nobody knows, where does the social metdia


go next, nobody knows that either - - media go next, nobody knows that


either, that's the point. We will try to figure that out, Suw


Charman Anderson is a social media consultant, and the editor of Wire


clouk is here. Some media -- wire.co.uk is here. Some media


sites you go on to and then move to the next one? There are social


media sites that come and go and you never hear of them. Other sites


like orchid huge for a while, and less popular now. There is a huge


ecosystem of media sites and social networks out there. There is a huge


big ones that most people have heard about, Facebook, Twitter,


linkedin. They are the players. Some of these big successful sites,


is there something that makes the break for them? Once you have


critical mass and you are the destination, it is hard for an


outside Tory breakthrough. If Facebook has a billion people


connected, that is where your friends will be. There is a barrier


to entry. Do they come and go, the Friends Reunited, or MySpace,


something like that, people can leave? Often it is the ones that


are in a hurry to make some revenue that fade away. Remember MySpace,


Miguel-Anxo Murado paid a lot of money for that, -- Rupert Murdock


went nowhere with that, it was founded on advertising and wasn't


about community. The people at Twitter and the other successful


networks are trying to get the user engagment right, a place where


people want to share and hang out, the money will probably follow.


Twitter and Facebook, people get angry at the idea ofed ands popping


up, it is not for the d ads popping up, it is for -- ads popping up, it


is not for the user? There is a risk of alienating users, people


don't want ads cutting into what they think of as a personal


conversation. There is also the risk, particularly for Twitter,


they foblg cuss so hard on a mass market -- focus so hard on a mass


marketing model, they are ignoring other sources of revenue. They are


putting themselves at risk. Because if the ads don't work for them. If


it doesn't make enough money, then they aren't set up to move on to a


different kind of revenue model. Like what. What would be better for


Twitter, do you think? There a few things they could do. Including


premium accounts and business accounts. When you look at networks


like linkedin, that gets two-thirds of revenues from fee, not


advertising. Advertising isn't the only way to make money. But Twitter


is resolutely ignoring other potential sources of income.


that another thing, you get interested for one reason or


another and building a community, then the ad, or something you


really don't like pops up, and that could be the death blow? Not so


much for Twitter. Twitter is all about tiny nuggets of communication.


140 characters. What screen does a tiny nugget of communication work


best at? On your smartphone. The smartphone, the mobile internet is


where the revenue will come from, that is why Facebook bought into


Instagram. For a slice of that. There is figures from a venture


capital firm a couple of months ago, that print media currently accounts


for 7% of our engagment time, but 25% of advertising. Mobile is about


10% of our time, but just 1% of advertising. It's going to cash up.


-- Catch up. In terms of the next five years or so. Have you any


thoughts of what will survive and what the social media landscape


will look like, so we can all make money out of it, what would you put


your money? Mobile is a key market. Mobile advertising is the nut to


crack. Facebook has done very well just over recent months in


increasing its mobile advertising revenue. They have 60% of users who


access Facebook through mobile. You are really looking at tools that


either allow people to achieve something really important,


Linkedin is about finding a job and your professional career, that


won't go away. Twitter and Facebook are about maintaining your social


life and maintaining social relationship, that won't go away as


a need. Whether Twitter and Facebook actually survive is


another kettle of fish. Do you really think so, given the size of


both of them? With Twitter, they aren't making a huge amount of


money at the moment. If they don't increase their revenues and start


to turn a healthy profit, there might be tension with the investors.


With Facebook the issue is the IPO, which was a bit of a shamble, and


their share price is shadeing at 55% lower than where it was in May


-- trading at 55% lower than where it was in May. That could cause


stormy seas for Facebook. That's all tonight, I'm back tomorrow. We


will leave you with the news that not everyone in the United States


is absolutely thrilled that Obama and Romney are back on the campaign


trail. It is good to be back in Green Bay


Wisconsin. We have to take back America, I'm counting on you.


I'm tired of Barack Obama and Mitt Romney. That is why you are crying?


Oh, it will be over soon Abbey. The Oh, it will be over soon Abbey. The


election will be over soon, OK? It is cold out and won't get warmer


over the next few days. A chilly start to the day, a brisk old wind


feeding showers across the country. Hit and miss, some place avoiding


them. Having a bright and breezy day, others seeing heavy downpours.


Mid-afternoon plenty of blue sky and sunshine. Temperatures aren't


perterrific, but out of the breeze and into the sun not too bad.


Shower towards the south coast. Some will be heavy, possibly


thundery too. It will be cold enough on the


higher ground of Wales. Not too many problems roaming the hills


tomorrow afternoon. Some sunshine inbetween. For Northern Ireland,


after a brightish start it will tend to cloud over with outbreaks


of rain pushing from the north. A disappointing end to the day here.


For Scotland, after an icey start in some place, plenty of sunshine


around, away from southern most areas across the borders. Hill snow.


As we hit the weekend, northern areas seeing that mixture again of


sunshine, a few showers, and it will be cold enough for further


snow over the high ground. Further south too, mixture, some bright


spells, but nobody, nobody is immune from some fairly sharp


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