Every major music artist these days seems to have their own iPhone app, but the latest app from the Black Eyed Peas is like nothing you’ve ever seen before. The app (iTunes link, $2.99) lets you follow each band member’s Twitter feed with photos, pose the band members in a 3D photo shoot, and even does an augmented-reality trick (when you point the iPhone camera at the Black Eyed Peas’ latest album cover, a character representing one of the band members pops out and shows his latest Tweet in a speech balloon). But what is really original about the app, is the 360-degree music video.

The video for the song “The Time: The Dirty Bit,” puts you in the center of a dance party with the Black Eyed Peas and a bunch of fans. (An iPhone 4 is recommended to get the full effect with no jitters). As you turn around while looking at the screen, you are surrounded by dancers and the band members. You can pan left or right, all while the video is playing. It’s like Google Street View filled with hot dancers, but in video.

“You are submerged and engulfed in a party,” says will.i.am, who spoke with me recently about the app. “You as a director can focus on things behind you.” He thinks 360-degree music videos will become part of many entertainment apps. In fact, he is forming a new company called—what else?—will.i.apps with Edo Segal of Futurity Ventures to create a platform for other artists to create their own 360-degree video apps. (Another Futurity Ventures company called 3d360 developed the 3D video technology). Segal believes that apps in general will become the center of media consumption.

But don’t try to call it just video. “It is so not video” says will.i.am, “that is so 2008. You cannot even compare it to yesterday. It is something brand new.” Adds Segal: “When you think about what a good app should do is put you closer to the artists.”

For will.i.am, these apps represent the future of music: “The concept of an album is dead. What the hell is an album nowadays? This allows artists to add more layers onto that 4-minute song that is audio only. Songwriting changes.” To illustrate this to me, he starts to sing, “as she was walking down the hallway and she seen that little girl and I told her to turn left—you can do all that and turn left—and I look up to the sky and saw the rainbow—you can look up at the sky in the app. You couldn’t do that yesterday, it was linear. Now it is directional. If I knew we were going to do this app when I wrote the song, I would have wrote the song totally different.”

Now he can put his fans in the music videos right alongside him, putting them in the center of his world. Here is a promotional video showing the app in action, and below are screenshots.

Earlier last week, as the day was coming to an end and I was speaking with my 5 year old at bedtime we shared the highlights of our day. I started by telling him the company that created the iPhone is about to come out with . . . I paused—how do I describe it?—well, a “big iPhone” I said. About this big, I gestured holding my hands about 10 inches apart. “Wow, Amazing!” was his instant reaction as his eyes lit up. Even my 5-year-old knows that bigger is better, especially when it comes to tactile interfaces. In fact, the advantages are probably more obvious to his generation than it is to ours.

For this first generation born into a world of the iPhone, Wii and soon the Xbox’s Project Natal, the distance between the metaphor created by these devices and the reality of their interaction is constantly shrinking. My wife is currently doing her PhD research on the merits of tangible interfaces for young children in education and the data is telling. There is no doubt that there is great potential to enhance learning with tactile computing. Through that lens the “Bigger iPhone” is akin to a bigger yard to play in or a bigger room. This insight is telling. For these kids the iPhone’s primary function is by no means a phone. It is first and formost a gaming device, followed by a networked camera, followed by everything else. Through this lens one can see the importance of the iPad in the historical trajectory of our human-computer interaction. What’s lost in all the complaints about what the iPad is lacking (multitasking, camera, etc.) is that people need to view the iPad on more than its merits as a first-generation product. Rather, they need to understand it in context of the evolutionary arc of computing.

Don’t think about the iPad as just a computer. Its true potential lies in its potential as a communications device. Already, it functions as an electronic reader, helping to bring the world of books to computers. But there is video and audio too, with the potential for VoIP apps and even one day a camera for video messaging. The artificial walls that separate our notion of communications and computing are being broken. It is time for the dawning of communications apps. Think about it. It makes absolutely no sense that we have these parallel universes on our devices that are relics of technologies past. The notion of voice as one stack of technologies and the rest must perish. Communications, both audio and video, will be weaved into the fabric of the app space. For example, an API should allow developers to integrate Skype-like P2P communications into their apps opening a new world of utility.

Only a company like Apple can have this kind of leverage over the telcos and only in the very near future will they be able to bring about this change. This goes for the iPhone as well as the iPad. The two are joined at the hip through 140,000 shared apps. In their dash to fortify their lead against the hordes dressed in Google colors, Apple must use its window of opportunity to push the envelope on what one can do with a touchscreen computer, but not yet with an Android-powered device. They must learn from their OS wars with Microsoft. Google will continue to copy their every move as did Microsoft before it. Fueled by their advertising money printing presses, Google gives away what Apple attempts to sell. This means Apple must drill deeper into the telco stack. Think of visual voicemail as a simple prelude. But they will have to go much deeper, making the communication experience itself evolve. Video calling will be made a reality with iChat for iPhone OS, and not just one-to-one calling but conference calling. Many claim that video calling is just a gimick and that it has never really caught on despite being available decades in one form or another. To them I would argued that it has never been attempted by a company with product-design excellence like Apple and furthermore it has never been integrated into a vibrant app ecology with tens of thousands of developers applying their creativity.

By opening up the communications stack via the API in a holistic way and introducing video and P2P realtime data transport, Apple will open a new world of communications apps that will further blur the lines between computers and communications devices. Imagine Xbox Live-type experiences where a group of teenagers fire away while being on a group audio chat, calling Hertz to reserve a car while seeing the agent and using swipe gestures to choose your car, even playing REAL strip poker (see illustration).

It was 1993 and I had just decided to drop out of college. I was a graphic design major in a great art school but decided I want to start my second company. Knowing this would mark the conclusion of my studies there I set out to create my final project. I would write a short story, design and produce it in print. I put out an edition of 300 and gave it to my friends and people who inspired me like author William Gibson.

Cut to November, 2009, when I returned from sitting on a panel at the second Realtime CrunchUp. I had urged the audience and participants that when thinking about the realtime web we should not consider the challenge through the lens of how consumers behave today. I argued that the future potential of the realtime web is not in the misnomer “realtime search,” as the consumption of this signal will predominantly be in what I call ambient streams. These are streams of information bubbling up in realtime, which seek us out, surround us, and inform us. They are like a fireplace bathing us in ambient infoheat. I believe that users will not go to a page and type in a search in a search box. Rather the information will appear to them in an ambient way on a range of devices and through different experiences.

A few days after I got back from the CrunchUp, I was organizing some old documents when I stumbled on I Was Just Dead< , a cyberpunk short story I wrote 16 years ago. A story about a world of augmented reality. A world where at birth a chip is embedded in people’s brains creating a reality where they no longer discern what is “real” and what is augmented in their surroundings (Hear the audio-book or download the free eBook below). It was strange to hear my former self calling out about the importance of augmented reality from across the span of almost two decades of experiences in the digital world, half of which were spent solving the problem of how to filter the massive realtime stream.

When trying to understand something potentially transformative, knowing what questions to ask is more than half the challenge. We are still in the early stages of these changes and don’t yet have the necessary metaphors to make the leap into the future. It is for that purpose that I want to suggest what I consider to be the building blocks of our next big evolutionary leap in how we use technology. The four main building blocks are:

1. Realtime Web (Twitter, news flows, world events, and other information which relates to changes in the world)
2. Published Information (sites, blogs, Wikipedia, etc.)
3. Geolocation Data (your location and information layers related to it, including your past locations and that of your friends, as well as geo-tagged media)
4. Social Communications (social graph updates, IMs, emails, text messages, and other forms of signal from your friends).

Before these building blocks can create an ambient stream which is not overwhelming, all of this data needs to pass through a filter. The Holy Grail is a filter which only serves up information which is relevant based on who you are, your social graph, what you or your friends are doing now, what you or friends have done before, and in context of other information you are consuming. It needs to be delivered wherever you are and on whatever device or display can deliver the ambient stream: mobile phone, laptop computer, TV, heads-up display in vehicle or inside your glasses. The future of how ambient streams might enter our world is illustrated with the following simplistic diagram:

Putting all of these building blocks together will be an industry-wide task. There are a relatively small number of people who have already managed to spend a lifetime thinking about this problem. It has bred several academic disciplines and many sci fi novels and films. These related fields include pervasive computing, everyware and the buzzword du jour augmented reality (AR). All of these technologies produce ambient streams. AR, in particular, (which is focused mostly on methods of how to render information visually) is capturing the imagination of innovators around the globe. The underling technologies that allow devices to marry data to physical locations continue to evolve at a fast pace, and with other disciplines jumping into the mix the magic is finally starting to happen.

One only needs look at a teenager today as they do their homework, watch TV, play a game, and chat while watching their Facebook stream to get a sense for humanity’s expanding affinity to consume ambient streams. Their young minds are constanty tuning and adapting to an age of hypertasking .A very useful metaphor is that humanity is constructing its own synthetic sixth sense. An ambient sense that perceives the context of your activity and augments your reality with related information and experiences. Increasingly, we will be sensing the world with this sixth sense and that will change the way we collectively experience the world. Going back to the point made earlier, the watershed event is when we will be experiencing this “ambient sense” without being in a retrieval mode (i.e. not when we go to the computer or our mobile device to find information but rather as a product of our activity, location, and profile in context with the events and information available to us in a wired world).

We will be seeing the first swells of this coming tsunami in the years to come, but for our children the ambient sense will play a bigger and bigger role as it slowly evolves and weaves itself into their consciousness much like Google search weaved itself into their memory functions. The challenges we face in terms of making real progress stems from the fact that the overarching goal is one that requires a multi-disciplinary approach across a myriad of data sets. While there are many companies executing in each of the quadrants few are in a position to access the full scope of data and therefore the ability to create the Holy Grail of filters is limited. This is where the world of walled gardens and deals with major search providers presents a challenge for progress. Many iterations and mistakes need to be made before we arrive at the right way to collate and filter all these different streams of data into an ambient sense. If only one or two companies are in a position to iterate, progress will be very slow and the probability of success diminished. For success, it is necessary to create an ambient sense that will manage to balance the level of interruption with insight and arrive at the true goal of any sufficiently advanced technology, which is to be transparent and taken for granted as part of the human experience. It may sound like science fiction, but there are engineers and entrepreneurs out there already trying to make it fact.

Is it possible in the age of Facebook, Twitter, Google, and Apple for a startup to innovate across the entire stack to come up with this sixth sense? Chime in at #ambientstreams

Guest author Edo Segal (@edosegal) has launched and sold several companies. In 2000 he founded eNow, which he sold to AOL in 2006 (after it was renamed Relegence). Today, he runs his Incubator/Investment vehicle Futurity Ventures, which recently launched a new search engine for wisdom.

Media scarcity is dead. In the future my son will have a flash drive that he will pay $29 for that will have the capacity to hold all movies and music ever released by a major label, studio or tv/cable network. It will take 30 seconds to clone the data over the network to a friend who will pay $14.99 for a device with double capacity a year later. How does the media industry survive such a coming disruption?

For many of us that have been in this game for a while, the word “convergence” harbors some shameful vibes. It conjures up many false hopes, dashed dreams and misfires. Nevertheless, I would contend that convergence is upon us and it has arrived from an unexpected delivery man: Steve Jobs. Apple has created a media consumption experience that has reduced friction to such a point that soon the consumer will not know if he is buying music, a movie or a game. The notion of App is changing. The lines between these different forms of media are quickly blurring and soon will be completely artificial. Already these distinctions are merely fossilized conventions that stem from consumers’ discovery habits. As those evolve, like learning that it is easier to go to Amazon and search to find a product than going to aisle 9 at the store. The coming confusion of the consumption experience where a user won’t care or know if what they are buying is a movie, a game or a music track presents vast opportunity.

The prospects for the old media industry appear bleak, as the rest of the media industry follows the music industry into decline. Indeed in my discussions it is apparent that the smart money in Hollywood already sees the writing on the wall. While the trend will take longer, it is clear which direction the wind is blowing. The main lesson to learn is that the market will punish you if you don’t deliver the goods.

But the entertainment industry has a vested interest in the success of this new type of convergence, as within it lies the secret to its continuing prosperity. The only way to block the incredible ease of pirating any content a media company can generate is to couple said experiences with extensions that live in the cloud and enhance that experience for consumers. Not just for some fancy DRM but for real value creation. They must begin to create a product that is not simply a static digital file that can be easily copied and distributed, but rather view media as a dynamic “application” with extensions via the web. This howl is the future evolution of the media industry. It has arrived from a company that is delivering the goods. Apple has made it painless for consumers to spend money and get the media they want where they want it, proving that consumers are happy to pay for media if delivered in ways that make it easy and blissful to consume. For all the criticism Apple draws on the walled garden nature of its business, it has even come around to stripping DRM and allowing users to download mp3 files.

Even today if you look in the iTunes App Store you will see a myriad range of “Apps” that are just evolved ways to package media. While the traditional part of iTunes still mirrors the product taxonomy of a Tower Records, the App Store is creating a folksonomy of media products. It is where new ideas evolve, thrive and go instinctively based on market power. The App Store is where the action is. This is where evolution is unfolding as direct consumer spending spurs media development.

In preparing this post, Erick asked me, “Is Apple a media company?” I thought about that and the answer is really that Apple is what media companies are missing. The missing part of the puzzle is what made media conglomerates such juggernauts in the past. Namely, distribution. The internet is stripping them of their control over the how their products are distributed. Media companies used to be able to create scarcity merely by delaying the distribution of their products across different channels—theaters, pay-per-view, DVD, cable channels, network TV, and so on. The internet disrupts this ability to create media scarcity. It is such a huge disruption, in fact, that it threatens the fundamental profit engine of the media business.

Both during my time interacting with senior management at Time Warner (where I worked at AOL after it acquired the company I founded, Relegence) and with some of my current portfolio companies that are working with the film and music industries, it is clear to me that many of the smart people running these media companies understand which way the wind is blowing. The music industry, as the one that has suffered most of the carnage, is ripest for change. Executives there are receptive to new ideas and move forward quickly, leaving me somewhat optimistic. It is also clear to me that it is hard for the industries which have not endured their level of pain to flee the golden cage of media’s past. But for those firms which rise to the occasion, there will be vast rewards. People’s hunger for good content will not subside. It will continue to grow, but so shall the unbearable ease of pirating it. The premise of extending the media experience to the cloud is a core necessity for the survival and growth of the media industry. It is the only way to for media companies to weather the coming tsunami of increased bandwidth and the ever open web. Hybrid media packaging with both files and an application layer in the cloud is core to a lucrative future.

For a great example of how change is happening see what Britney did today at @BritneySpears. It was, I believe, the first time a major artist premiered a music video on Twitter. This drives people to Amazon or iTunes to buy the track but in the not too distant future it could be the start of much more than that. A complete experience will unfold that will be interactive and convert to new revenue streams. Not just a purchase of a track but of an app that pulls consumers into an experience and further promotes user engagement and virality. Media becomes a platform with a funnel of traffic and conversions to alternative revenue streams. All boosted by the frictionless billing that Apple has created in the App Store. Media executives will have realtime metrics for their success as it maps to revenue and in turn this will accelerate innovation and help redefine media.

If you are a media exec and you look at your product and at the end of the day it’s a digital file that can be copied, then you have a serious problem with your format. Think of your product like a pie chart of the value you are giving the consumer. If 100% of the value is in that file, it is not a sound approach for defending the future of your business. However, if a portion of the experience is derived thorough an integration with a Web component that will yield additional value in functionality or social elements, then it will be more sustainable. There are many such examples emerging in the app store (I am T-Pain, TapTap and many more). Applications that let consumers interact with the media. Create things and share them with their friends. These will not only make the consumer the one who markets your product, but also create an unprecedented level of engagement. That level of engagement will directly map to reduction in piracy as consumers will pay for this experience and wont be able to copy it. Sell access and experiences, not media files.

Guest author Edo Segal (@edosegal) has launched and sold several companies. In 2000 he founded eNow, which he sold to AOL in 2006 (after it was renamed Relegence). Today, he runs his Incubator/Investment vehicle Futurity Ventures, which recently launched a new search engine for wisdom.

Editor’s note: Below is an open letter to our President from Edo Segal, a concerned web geek who cares about the future of our democracy. It is followed by a proposal and a new website for anyone who thinks they know what #obamashould do (cynics please skip post).

Mr President,

On the night of your acceptance speech, just before you walked on stage, “you” sent out an email saying “i will be in touch soon”—but you disappeared and all we were left with was the strange feeling you get when your older brother ditches you for his cooler friends. Does it take you winning a Nobel prize to get another direct letter from you?

Where’s the attention? The yes-we-can attitude, making us feel we can be good again? It seems that since you made it to the Oval Office you have been too busy at work, and our relationship has really suffered.

I recall that as the election results where announced, there was an epiphany that hit the pundits and us web folks at the same time. “He’s going to govern this way” we all thought. What we meant was that you will continue the evolution of direct democracy beyond using the Internet for fundraising, heralding a new age of direct access to the citizenry. A new age of democracy where the President has your email and can talk to you directly. An age without intermediaries and pollsters—just us and that cool guy who’s running the country.

Regardless of our political views, almost everyone in this country was in awe of how you came to be in office and changed how elections are won forever. But for the readers of Techcrunch, the people who grease the wheels of our progress online, it feels like after the hangovers were over and you moved on to set up your transitional government, from that day, what was a highly effective and motivating direct relationship with your supporters, an emotional relationship that was predicated on a real connection evaporated. And what we were left with was the most effective spam bot in the world (Gmail doesn’t block it) . This is wrong in so many ways, let me count just a few:

1. Stop asking me for money: Why are you still asking me for money? I think I am not alone in being confused with the notion that you are still asking me for money after you were elected President (I know why you need it intellectually but not emotionally). I mean at this point, I feel like you should be paying me back with change and not billing me every week. I pay a big bill every April that should just about cover it.

Using the “Network” purely as a means to raise money without the additional layers of engagement and relationship is offensive. We are the network. By just using email as a system to raise money you loose the soul of the connection you established with millions of people.

2. Your singular focus is distracting: While there has been much discussion about the administrations’ notion of taking on multiple fronts at the same time, the online channel recently has been fully saturated with a singular purpose of supporting the very important policy goal of universal healthcare. But in doing so, you have played into the hands of your opponents. The grind on Capitol Hill and the levels of complexity that are involved in making this happen, and the time it takes are not a recipe for engagement—they are a recipe for disaster. You are losing your audience and failing us on a major promise of direct democracy.

When I explained my support for you at the very early stages of your campaign to bewildered people who didn’t see how it could be possible for you to win the Presidency, I articulated that regardless of the specific nuance of your policies, the fact you have the power to motivate people in this way is priceless. You demonstrated that you can build on top of the best practices of prior online campaigns (Dean). Delegation to really smart people culminated in the most effective campaign financing system in the history of democracy. But if you don’t keep watering the soil from which your support stems, that direct relationship, you will not be able to make the historic policy changes you seek. Your base is eroding as you focus all of your communication channels on a VERY heavy piece of legislation. Don’t spam us, engage us.

3. The promise: From the perspective of the history of media, the level of engagement you can generate through the Internet has typically been reserved for occasions of war and violence, for times of strife and conflict. Like the days of WWII when people huddled around their radios to hear the comforting voice of their leaders. Imagine applying the same level of engagement that won’t just fuel death destruction and line the pockets of the military industrial complex, but rather will power true change, growth and improve the quality of life for all people. This is within your grasp if you follow through and use the medium appropriately.

Mr. President, beyond the content of your ideas, now is the time to extend the way you govern as we all heard you promise. Make us care again. Online engagement is the key to fostering the support you need to accomplish your policy goals. Engagement is the key to maintaining your base as you mount these vast campaigns. Getting the government to set up a network of Web 1.0 sites is a start, but we need much more. If you continue to spam us and recycle old speeches off a teleprompter into email (like you did with the Nobel eMail) you will lose your base, but if you step up to the challenge and continue to take risks and push the envelope in structural ways that only you can, your greatest legacy could be more than enacting historic legislation or winning a premature prize. It could be the very way our democratic process works and how we view government.

That is my letter to Obama, but it is not enough. The notion that we will evolve the very essence of democracy beyond the already achieved goal of changing campaign financing and moving power away from private interests is profound. I truly believe it may end up being the greatest piece of innovation we are collectively offering the world in the coming decades. But to make additional progress, you and I need to step up. If each of us contribute a bit of creative energy we can accelerate this evolution by a generation

In the past, the main skills that effected political outcomes in the communications realm were polling, copy writing, speech writing, and directing and producing for radio and television. But today and in the future, the most potent creative skill-set is that of creating online connections. Yes, I’m talking about you. Our professional careers depend on our ability to create platforms that engage millions of people and constantly grow that level engagement. The readership of this blog constitutes the highest concentration of such competency on the planet. We spend our lives creating platforms that aim to engage millions of people.

We get it, it’s tough for government to take risks and thus political innovation moves at a glacial pace. Maybe we can give the pols a hand, help speed things up a bit.

Rather than just rely on comments and the ill will of the trolls, I took a little initiative and with the help of the good people at iGeneration who volunteered their time to build Obamashould.org, a site for the community to contribute ideas to the President. Please spend a few minutes there and voice your opinions in a constructive way. Or just tweet your ideas with the hashtag #obamashould. The site will track retweets, and the ideas gathering more support will float to the top automatically. Its like an http://www.ideastorm.com/ meets tweetmeme.com and uservoice for our President. BTW, Mr. President, if you want the source code, it’s yours. If you are a developer and want to contribute to the project please join us. We will take the best ideas that surface to the top from there and get them built by the community. We may even launch some of them here on Techcrunch in a few months.

Let me throw out some #obamashould’s to start the ball rolling. Click the YES re-tweet button if you support it!

Idea 1: What you did to get us, you need to do to keep us. Keep a weekly Youtube post that gets emailed to the base. It feels like you are becoming hostage to the status quo of what presidential communications has always been. For both the Y Generation and many of us older folks, the notion of what constitutes presidential behavior is changing rapidly with your actions serving as the main catalyst. communications is when in fact you are the one that is supposed to re-invent it. It’s not a presidential address in the conventional sense of the word. Give us genuine direct talk over words tested with pollsters any day. A direct candid discussion about a given topic once a week that is not read off a teleprompter is priceless for the continual sense of a direct relationship. Just flick open your laptop in the oval office or in your study at night and talk to us. Have a small panel of trusted advisers review it, and if no serious red flags are raised post it and email it to us. The value of genuine conversation from a man with your insight will way overshadow the shortcomings offered in the prose. You will probably say things you will regret, but the damage done will be dwarfed by having a continued sense of renewed personal relationships with your citizens. If you do this, they will be there when you need them. Retweet to vote up or Comment Here

Idea 2: Engage the people via email and ask them for their opinions, not just their money. Have a weekly poll question that is linked to social media (twitter, facebook), creating a viral engagement engine. In addition to the immediate policy objectives, you need to understand that such engagement is not only a means to an end, but an end in itself. Retweet to vote up or Comment Here

Idea 3: Give $500 of your money to charitywater.com (Video) and send out an invite from their system to everyone on your mailing list to do the same. Tweet it, put it on facebook. Show people how they can use the web to effect positive change in the world and do good again. Why not? That single email will effect millions of lives around the globe. Giving changes people, help them give and start that chain reaction of good will. Use your power to promote things that have to do with generosity of spirit, not just hard core policy. This is a way to lead through example and not just talk in the abstract about the need for volunteerism. Your effect on the world cannot be reduced to a series of policy wins and losses. Different from prior Presidents making public their charity contributions, doing this via a digital medium is like clicking a button that activates a viral system and magnifies your contribution a million-fold over the web. Retweet to vote up or Comment Here

What do you think #obamashould do?

Go to www.obamashould.org and please contribute ideas now. If you want to join a vibrant open source community of people that are passionate about helping evolve democracy online, we need your help. Join us here.

Guest author Edo Segal (@edosegal) has launched and sold several companies. In 2000 he founded eNow, a search engine for the Real-time Internet in an age that predated RSS as a popular medium. As such he has had a decade to think about its implications. He ultimately sold the company (renamed Relegence) to AOL in 2006 and today runs an Incubator/Investment vehicle called Futurity Ventures. He recently launched a new search engine for wisdom.

In a way we are all virtual stock holders in Twitter. We all have a vested interest in its success. Facebook is soon to monopolize the social stream to the same extent that Google has done with search. That is not good for anyone, including Facebook. I have had many discussions with people in recent weeks about the face-off between twitter and Facebook and also about the high probability of Twitter cutting a deal with Google. When I was asked by Erick Schonfeld at the Real Tiime Stream Crunchup (Video) event about my opinion on Twitter giving Google their firehose feed, I responded that they could do that if they don’t plan to sell their company in the future. In other words, it is my humble opinion that if Twitter was a publicly traded stock its value would drop by 75% the second that deal was announced and for good reason.

Twitter is important. How often does a company come along that really changes consumer behavior? That creates a new form of media consumption and connectivity? For all the thousands of startups covered on Techcrunch only a few have a profound impact on the arc of internet history. Twitter has earned its spot in that pantheon and now it remains to be seen if it can play a bigger role in how to monetize the stream and in the process build a real business.

At this moment in time, Twitter has such a stronghold on this new form of real-time consumption that it has the potential to dominate the category. But its window of opportunity is closing fast as Facebook and others hurl themselves at that prize. The experience of real-time communication and search, that sense you get of unfolding streams of relevant information to your interests and queries flowing in a digital river has arrived with Twitter coursing first through the rapids. But now that we have arrived at this new medium, what next? Does Twitter become an example of a utility that is emulated by others that already have a monetization engine, leaving Twitter to ultimately drift to a respected place in Wikipedia like Netscape? Or does it continue to push the boundaries and create a sustainable and growing business that will allow it to continue to ride the whitewater?

If twitter is to confine itself to being a communications medium, or even worse, a news distribution engine, it will surely perish. By analogy, Google as a business is not a search engine but an advertising business that is printing money at unprecedented rates. Google does this by owning the equivalent of distribution in the digital age. Its just that the meaning of the word “distribution” in the digital age has shifted. Google, as the entry point for such a vast audience, effectively owns the distribution on the Internet as a business leader and brand. Its lead continues to grow as the audience grows.

Google’s economics lay in the economy of intent. The intent of users to purchase a product or service when they use Google’s search is what drives its money presses. The context of the users’ actions and interests map to an intention which advertisers are eager to pay for. The ability to automate the placement of advertising next to relevant content and map consumer queries to useful advertising stands at the heart of Google’s success.

This is something that has been notoriously missing on communication platforms. See AIM as an example. What was once an omnipresent juggernaut of a product is inching towards being a footnote in internet history. One that has always struggled to monetize its vast audience. The same is true for other communications platforms such as Hotmail and Gmail. They have become strategic traffic drivers in companies with a broader monetization engine. Look further into innovative news aggregation platforms such as Digg, Google News, and Techmeme and you see that it’s pretty tough to generate significant revenues in news, certainly not Google-scale revenues. Even for pillars of the industry such as the New York Times, big online profits are elusive. So there are not many prospects for building a sustainable multi-billion dollar business for Twitter either as a communications platform or a news discovery engine.

The way to make Twitter into a sustainable business is to tap into the economy of intent. God knows Twitter has that potential, but it has a narrow window of opportunity in which to execute. The business promise is to create a new type of useful advertising for people that is consumed in the context of a new form of discovery—one that for the moment is unique to Twitter but, alas, not for long. If Twitter doesn’t pick up the pace at this moment in time and take the path leading to building a business, it will begin to destroy its value. By doing a deal that will give Google unfettered access to real-time results from Twitter in Google search, Twitter will effectively be giving up the fight and losing the war. For if consumers can get the same experience that is currently unique to Twitter on Google, why would they need to go to Twitter to search? If they don’t bring their intentions to Twitter search, then Twitter is not participating in the Economy of Intent and as such will diminish its value to the single-digit millions.

At the risk of stating the obvious let me throw out some constructs. There has been much speculation about how Twitter will make money. From #pastryto #diabetes, the world of Twitter is self-organizing in a highly effective folksonomy that is vibrant and useful. Today, Twitter users are left to their own devices when it comes to unearthing these gems in the stream. As Twitter further develops its discovery(taxonomy) and search engine, the valuable content streams will be unearthed. Think of the simple impact of auto-complete in the search box to # tags. This is but one simple move which could start to drive traffic to focused streams of information, which could also map to useful advertising, just like on Google. Start with creating a marketplace for advertisers around the #tags, then search queries, and see how valuable the experience Twitter created really is. Throw in the recent evolution in geo-tagging and you add another layer of usefulness. Typing in “amazing restaurant” when you are in Soho should show a fresh stream of nearby locations, recommendations, and warnings. As Twitter make these changes, users will start focusing more on discovery, and it will become a self-fulfilling prophesy. Users will alter their behavior to capture the search queries. The notions of surfacing more advanced trends and audience recirculation present further opportunities. There is so much that can be done in this domain once Twitter has the critical mass of audience and data.

Twitter has a unique opportunity to innovate and create new forms of useful advertising that will truly help both users and advertisers. This was the key to Google’s success and is the key to Twitter’s future. It takes time for advertising to become useful as it requires a significant liquidity of ads. Twitter has to start soon to build up that liquidity in time for the face-off competition for the advertisers. They need for buyers to know they are the go-to place for in-stream advertising. Google is at a big disadvantage at this junction in time. One only needs to set a Google alert to see how latent their Twitter discovery is (I have seen alerts come in for tweets that are 3 days old). Google has not made it a secret that the strategic importance of the real-time web registers with them.

For Twitter to give away the farm (its firehose of Tweets) at this stage is tantamount to suicide and can only be defined as a form of creative laziness. Twitter, you got this far don’t get too comfortable with all that money in the bank. Get off your asses and push, you owe it to history. There are so many things you could be doing short of giving up and serving yourself up on a silver platter. If you must do it, if you do sell your data or yourself to Google – make ‘em pay, they can afford it. If you give away your data to the majors, they wont need to buy you anyway and if you don’t create a solid way to make money, you can’t survive on your own.

Make your own path, and you’ve got it made.

Games are the most lucrative category of apps on the iPhone (and iPod Touch) and they promise to be just as popular on the iPad. Yesterday, I visited Edo Segal, CEO of Futurity Ventures, to see what a game developed specifically for the iPad looks like and how it is different from iPhone games. One of Futurity Ventures portfolio startups is Vertigore, which developed its first game for the iPad. It is called Pacific Defense ($1.99 on iTunes for the next two days) and it puts you in a WWII destroyer gun turret shooting at enemy planes above and torpedos below.

The game is designed so that you hold it up in front of you and look through it like a window into another world. The bigger size of the screen gives it more of a window-like feel than the peephole view you get on the iPhone. The game is in black and white with scratches to make it look like an old newsreel. You tilt the iPad to aim and tap the guns on either side with your thumbs to shoot. But the game really becomes interesting when you turn on the augmented reality control mode in settings. Then instead of just tilting the iPad, you can turn your whole body and spin around to shoot at the planes 360 degrees around you or at the torpedos below. If you play with headphones, there is also 3D sound, so you can hear the planes coming from your left or right or from behind. A swivel chair is really key to augmenting the augmented game play (see video below).

If the iPad ever gets a camera, the game could be updated so that the planes fly through your room or wherever you are. Maybe the iPhone version will have that feature. In the video below, Segal shows off some of the game play and talks about the opportunities for augmented reality video games on the iPad.