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Twitter lays the foundation for it’s revenue model

To much dismay amongst the digerati Twitter yesterday announced a limit of 20,000 calls per hour to their API for whitelisted apps.

My guess is that Nick Halstead has it right when he says this is about them setting themselves up to charge apps that want to go over that limit:

To me twitter needs to put in place a charged API – and before you all start screaming ‘NOOOO!’ think how else this can ever work, the fact is everyone is concerned about twitters long term survival – it does need a revenue model and it being based upon it being a central hub of micro-messaging that is reliable and scalable (which I think they are now starting to prove) is the most natural solution.

And because Twitter has opted for a totally distributed where they don’t force people back to their site the whole time charging for their API is about the only good revenue option I can think of.  And remember that this distributed model is generally regarded as one of their strengths.

However this argument isn’t clear cut – Louis Gray sees things a little differently:

Twitter’s move, at its heart, looks to be one to protect themselves. As API Lead Alex Payne wrote yesterday, “This is essentially a preventative measure to ensure that no one API client, even a whitelisted account or IP, can consume an inordinate amount of our resoures.” (sic)

And further:

But there didn’t seem to be any options for services …. to get a work-around.  There was not an option to pay to get increased access capabilities, or even tips on how to optimize code so that it takes less effort to achieve the same result.

If Nick is right in thinking this is a step on the way to charging for volume access to the Twiter API, and I think he is, it would seem to make sense to me for them to be clear about that.  The uncertainty they have created at present will be a disincentive for developers to put time into working on Twitter based apps.

It is worth noting that so far the whole ecosystem of apps that has sprung up around Twitter has been a free party funded by Twitter’s VCs.  At some point that had to stop – Twitter itself has to make money and so do any of the Twitter based apps that have ambitions of being more than a passing fancy.

I’m sure things will get clearer over the coming days.

January 22nd, 2009 | Category: Blogging, Business models
  • Very interested to read your comments Nick and I tend to agree that this is probably the way Twitter will go. However, I feel that it will only succeed in passing the cost down the line to developers and end up stifling, to some degree, innovation on the platform.

    Personally, I would like to see them leverage their incredible power to garner early-adopter insights and sell them to brand marketeers. We are in an age where businesses can get closer than ever before to their customer base and truly start to understand and engage with customers on a level never previously seen. I think Twitter's incredibly valuable data could be sliced and queried for companies in a way for them to much better understand how their brand is perceived very much along the lines of what FreshMinds are doing with FreshNetworks.

    Expanding on that point a little, I have a vision that Twitter (or a tool like Twitter) will eventually be integrated into many customer support departments so you can get customer support via your Twitter client and queries / responses can then be aggregated in an intelligent way to direct new queries to previously answers. This would be a great step towards a semantic enterprise web application and Twitter could drive this with huge revenue potential.
  • Tks David. I agree the data-mining opportunity is an interesting one, but it would be quite hard for Twitter to hit scale on this model by itself. By charging for the API they enable others to pursue this opportunity, possibly in a myriad of small ways.

    You are right to point out that this will stifle development, although I suspect this is an inevitable consequence of needing to make money.
  • nickhalstead
    Like everything a balance must be found between allowing growth through free access and the move towards a model in which twitter has revenue. I do not think that a move to paid could work for at least 6 months - as right now we are starting to see a tipping point into mainstream which of course must be largely due to the app support. But giving notice right now of intention would give confidence and also allow developers build a roadmap.

    One thing I did not cover on my post was the typical requests that are allowed free on other services, fav.or.it integrates with I think 18 external services, some of which we have special arrangements with because of the default limitations. But it is not unusual for most API's to limit to 5000 a day - which kind of puts 20,000 an hour in perspective, and even the mighty google attaches a 50,000 per day limit on most of its services.
  • Nic, very interested to hear your views on this. Personally, I don't think Twitter should go down this route. Anything that stifles innovation with developers undermines one of their main reasons for success.

    I believe the Enterprise is the key for Twitter (but not in the Yammer sense). I've posted on this in more detail and would be interested in your thoughts.

    http://internet-biz.blogspot.com/2009/01/what-t...
  • Interesting piece Nic, thanks.
  • Nic - great post. I think that you're right, this is inevitable. A portion of my startups product works of Twitter and it's a bit scary to see what costs this might introduce for us. However, without some costs to someone, there won't be a twitter eventually. We'd be happy to pay a reasonable amt.

    Just found your blog today for the first time and definitely enjoyed. Would love to connect sometime. @ryangraves

    Cheers.
  • Gnipcentral.com provides an invaluable service in this area... we use them for Retaggr.

    Their offering is not 100% complete, but they already have a charging scheme in place for heavy consumers of twitter (and other publishers') data.
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