Twitter is moving to control the user environment so it can make money

 

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I have been thinking some more about Twitter’s Promoted Tweets, their acquisition last week of iPhone client Tweetie, and the launch earlier this week of Twitter’s own Blackberry client.  It seems to me that all these moves are about the same thing – to get more control of the user environment so they can put ads on it and make some money.  Roger Ehrenberg put it this way on his Information Arbitrage blog:

All of a sudden it is as if Twitter has finally come around to a strategy for controlling and extracting value from its vast assets – its users and those who wish to reach them.

If Twitter were to have continued its role as utility, it is hard to see how it could have generated an acceptable return for its investors (and sustained itself over the long run).

I don’t have a problem with this strategy, a company has got to make money after all.  That said, it will be interesting to see if they can make the ads sufficiently effective that they can make big revenues without detracting from the user experience too much.  There is only one company I can think of which has pulled of this trick well before, and that is Google.

The people who might have a problem with this strategy are the ecosystem developers.  Clearly if your business was a competitor to Tweetie or a Blackberry Twitter client your competitive landscape has now shifted against you, maybe decisively.  The big question here of course is the extent to which Twitter will attempt to compete its developer ecosystem out of existence.  Here it is interesting to refer back to Fred Wilson’s Twitter Platform Inflection Point post of last week.  If you haven’t already you should read the whole thing, but in summary he looks at the Facebook and desktop computing platforms and says that the interesting ecosystem partners for Twitter are ones who create entirely new business areas like social gaming on Facebook and desktop publishing on the desktop rather than those who fill in ‘holes in the platform’, like SuperWall did on Facebook. 

The most visible ecosystem partners at the moment are third party client developers like Tweetdeck and the ad platforms like Tweetup and at this stage I think it is a little unclear how they will co-exist with Twitter – it doesn’t seem to me as if they qualify as entirely new business areas as per Fred’s definition.  As you would expect this question of co-existence has been put to Twitter and their answer is a little ambiguous.  In tones which echo Apple, Twitter has started talking about maximising the user experience and how they will take steps to remove any user confusion – language which could be used to justify almost anything. 

You can see from the interview with Twitter COO Dick Costollo on All Things Digital that Twitter wants to keep its developer community onside, but you can also tell from the slightly tortured language he uses that the company is now engaged in a much more visible balancing act between its own interests and those of its partners.  Which brings me back to the title of this post – Twitter needs to make money, and lots of it, and that means lots of advertising revenues, which requires their ads running where people are using Twitter.  I think that means they will develop more clients (having done Blackberry and iPhone it is difficult to see the logic which says the desktop is different) and they will protect their Promoted Tweets from competition.

We are witnessing Twitter growing up here, just as we watched Google grow up before them.  Unfortunately growing up usually means that it is no longer possible to be simple, open, transparent and an unequivocal force for good.  Instead responsibilities to different stakeholders like shareholders and ecosystem partners have to be balanced and that usually means people’s interests get sacrificed, and it is usually the small partners who suffer first.  It will be interesting to see how much Twitter is able/willing to play totally fair with its ecosystem partners, but I suspect it would be a world first if they were able to manage this phase of their evolution without upsetting some people.  Indeed the founder of the popular third party Blackberry client UberTwitter is already claiming that the Twitter Blackberry app makes use of API calls that he doesn’t have access to.

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  • Instead of protecting their Promoted Tweets I think that Twitter should allow third party applications to run them and give them a revenue share (50%), so they can monetize the traffic generated outside Twitter and their own apps.
    Also, do you think TweetDeck is smelling an acquisition? 🙂 It'd be good for the UK web scene for sure.

  • Hi Fabio – I'm pretty sure Twitter is planning to let third party sites run promoted tweets and do a rev share, and I would count that as 'protecting'. What I suspect they will make difficult is for third parties to run competing sponsored tweet systems.

    I agree it would be nice if the UK got a success like Tweetdeck getting acquired, but Costollo indicated that is unlikely in the video I linked to.

    Cheers,
    Nic

  • Thanks Nick. I actually noticed Costolo's words after hitting send 🙂

    I think it's fair if Twitter wants to protect their promoted tweets, as much as google protects their sponsored links. Depending on how this new Twitter-ads strategy rolls out we may well find people specialising in “SEO” for Twitter – how would it be called then, TSO? 🙂

  • I like it. The good thing about this development is that Twitter might grow to provide some meaningful competition to Google.