Twitter's war on partners: strength or weakness?

On Friday, LinkedIn announced it would no longer be distributing Twitter’s (140-character) content. Ryan Roslansky, “head of content products” helpfully pointed out that the policy only applied to content in, not content out: if you start a conversation on LinkedIn, it can be mirrored out to Twitter, but not vice versa.

Roslansky said the three-year collaboration was ended by Twitter, pointing to a blog post by a Twitter product manager entitled “Delivering a consistent Twitter experience” which was described as the nominal reason for the change to cut down on partner access to Twitter’s APIs and content.

Of course, this is brazen dissembling, as with similar claims last summer taking over URL shortening (bypassing bit.ly, tinyurl, etc) was to provide security. Twitter is kicking out partners because it wants control and to my mind that’s both a strength and a weakness.

The strength is that Twitter can do it — so far it’s the only game in town. If it aspires to end-to-end integration ala Google, the more partners it can disintermediate, the better. As with its website redesigns, this allows it to better know what’s going on — unlike the WWW, you can’t read anything on Twitter without signing in (and letting the company know whether you’re searching for Obamacare or Kardashian). If it has shut off LinkedIn, how far behind is Facebook?

At the same time, the increasing integration could also reflect a sign of weakness, specifically its one-trick business model. The only way Twitter makes money is putting eyeballs in front of ads. Any chance to view content away from Twitter is a chance to follow Twitter’s content without Twitter ads. That — and a natural fear of the 800 lb gorilla — is why it cut off Tweets from Google searches.

However, this increasing control has come at the expense of the user experience. I have long used the Tweetie client by Atebits LLC. Twitter bought Atebits, eliminated the client, and replaced it with a defeatured substitute posted to the Mac App Store. The website design also provides me less control of what I see and what I show on my website.

To my mind, this strategy is begging for competition. Twitter is gambling that nobody can knock it off the hill: the (direct) switching costs are low, but the network effects are huge. Google is certainly trying, but so far it’s not gaining traction and if Google doesn’t have the content (and customers) to displace Twitter, who does?

In the end, Twitter may become for me a write-only medium: I’ll give Twitter free content (that supports my blog and professional career) but not read content there. I suppose we both make out from the deal, but — like any other cranky old-timer — I’ll now and again remark how Twitter was once a useful news service back in the good ol’ days (when I walked 5 miles to grade school through the San Diego snow).

Twitter: we control your redirects

Starting this morning, Twitter seems to have pre-empted all URL-shortening services in favor of t.co for all Tweets sent through its network. I noticed this not only because all the tweets I follow are t.co infested, but also because Tweets I sent this morning shorted via bit.ly were re-shortened via t.co.

This is not exactly what Twitter said it was doing. The most recent (August 5) posting to the developer blog by (“developer advocate”) Taylor Singletary announced:

Beginning August 15th, when a user tweets or sends a direct message containing a URL 20 characters long or greater (the length of URLs wrapped with t.co), the URL will automatically be converted to a t.co-wrapped link. We will eventually wrap all links, regardless of length, but until then there's nothing you need to do to support this change. When we're ready to wrap all links, we'll give you plenty of time and make another announcement.

OK, so it’s 2 days early. But more importantly, the 20-character limit means that effectively all links are being rewritten: bit.ly, lat.ms, nyi.ms. (Note that the “http://” costs everyone 7 characters, whereas “www.” only costs 4)

Interestingly, the tweets are being sent with the t.co, those tweets link to the t.co if you copy the link on the Twitter website, but are being shown using the original URL. So the tweet I sent this morning from @openITstrat looked like this when I sent it:

NYT obit: CCNY prof Daniel McCracken (1930-2011), who wrote best-selling Fortran and Cobol texts http://nyti.ms/rjixBb (I owned both)

but on my client looks like this:

NYT obit: CCNY prof Daniel McCracken (1930-2011), who wrote best-selling Fortran and Cobol texts http://t.co/PpFFjXV (I owned both)

On Twitter.com, it looks like this:

@openITstrat
Joel West
NYT obit: CCNY prof Daniel McCracken (1930-2011), who wrote best-selling Fortran and Cobol texts nyti.ms/rjixBb (I owned both)

with the nyti.ms actually a t.co link if you click on it. (Of course, the website tweets are shown in the extra-ugly “New Twitter” that I fought to avoid for months.)

TechCrunch said that this week would include a test of the new service, but this appears to be no longer a test.

As is common for Web 2.0 companies that use indirect monetization (NB: Google, Facebook), Twitter is being disingenuous as to their reasons for eliminating the customer choice and control over URL links. It’s not about saving 2 characters, and it’s really not about URL security. (The fact that they can remap a URL into a t.co and back shows that they can automatically detect what URL is being linked).

After Twitter announced its plans a year ago, Alistair Croll summarized the real reasons in a posting on the O’Reilly site:

Twitter has been open with its data from the start, and widely available APIs have created a huge variety of applications and fast adoption. But by making their platform so open, Twitter has fewer options for monetization.

The one thing they can do that nobody else can -- because they're the message bus -- is to rewrite tweets in transit. That includes hashtags and URLs. Twitter could turn #coffee into #starbucks. They could replace a big URL with a short one. And that gives them tremendous power.

Twitter recently announced a new feature that makes this a reality. The t.co URL shortener -- similar to those from bit.ly, awe.sm, and tinyURL -- might seem like a relatively small addition to the company's offering. But it's a massive power shift in the world of analytics because now Twitter can measure engagement wherever it happens, across any browser or app. And unlike other URL shorteners, Twitter can force everyone to use their service simply because they control the platform. Your URLs can be shortened (and their engagement tracked by Twitter) whether you like it or not.

In other words, Twitter wants to control all the web analytics for URLs sent via its service, as a way to increase it monetization to support its planned IPO.

Is there some reason why Twitter can’t just admit to this in an honest way, rather than wrap it in a rhetoric of psuedo-customer concern? Is there a shortage of honesty among Web 2.0 companies? (NB: Facebook, Google, etc.)

People know that free services have to be paid for somehow. Unlike Lt. Kaffee, I can handle the truth and I imagine most customers can too.

Betting too much on Twitter

Silicon Valley and the VC world are-a-twitter about the $200m venture investment in Twitter that leaked today. The number is mind-boggling on several levels.

First, this is a Series F round when most companies would have IPO'd by now. We can’t really call it a mezzanine round if no IPO is in sight.

Second is the huge bet by Kleiner Perkins, which seems to be moving away from its recent dalliance with cleantech and a certain VP-turned-VC. I was being interviewed by a reporter on this topic and my planned response ended up on the cutting room floor:

In funding Twitter, Kleiner Perkins is going back to its roots -- the sort of information technology companies that Gene Kleiner and Tom Perkins knew best, and the ones that created its reputation.

One might read this as a repudiation of the Al Gore-led foray into cleantech. Certainly the venture industry -- as well as those of us who study it -- have figured out that the scale and timeframes of building energy companies or car companies aren't going to work for venture investors.

Finally, there’s that $3.7 billion valuation. I’m a regular Twitter user, and recognize it success in building network effects and an installed base. Even so, I haven’t seen evidence that its planned revenue model is going to work (which must be why it needs expand via dilution rather than retained earnings).

Apparently I’m not the only skeptic. Business Insider quotes Series B/C investor Union Square Ventures as not being interested in this round due to the valuation. As Fred Wilson of USV wrote:

One thing I've seen many VCs do wiith their initial investment in a company is invest more when the valuation gets expensive. They are ownership driven, not valuation driven. So if they originally wanted to invest $4mm at a $20mm post money valuation and buy 20% of the company, they talk themselves into investing $8mm at a $40mm post money valuation so they can still buy 20% of the company.

I have never liked this approach. When the price of an initial investment goes up, I prefer to invest less, or nothing at all.
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Investing more when the price is too high makes no sense to me. If you are overpaying by 2x, doubling down feels like overpaying by 4x.

I think the root of this "doubling down on the overpay" issue is that many VCs manage large funds of other people's money and they really don't care so much about how much they invest in each deal. They are looking to buy large stakes in companies and hope that one or more turns into a big winner.
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So instead of being ownership focused, I prefer to be valuation focused. And the key figure I look at is average valuation of our entire investment. We take the total amount of capital we have invested in a company and divide it by our total ownership. We like that number to be as low as possible relative to the current value of the business. I believe that is the recipe for the best returns and that is what we seek to deliver to our investors.

This is yet another example of herd mentality among VCs, and the disconnect between VC risk and limited partner risk as VCs make these huge bets.

Monetizing Twitter

Michael Arrington of TechCrunch remarks on Twitter’s dilemma for starting its revenue model. To reword his points:

• Many firms are acquired pre-revenue and thus their valuation is made without proof of its revenue model.
• Before a startup has a revenue model, its revenues are anyone’s guess.
• Once a firm has revenues, the range of guesses will be much narrower — and often lower than the most optimistic predictions.

Of course, I’ve long been skeptical of Web 2.0 companies and their ability to create viable business models.

Cross-posted to Engineering Entrepreneurship.

Twitter-Geezers

The NY Times updates misconceptions about Twitter’s demographics:

Just 11 percent of its users are aged 12 to 17, according to comScore. Instead, Twitter’s unparalleled explosion in popularity has been driven by a decidedly older group. That success has shattered a widely held belief that young people lead the way to popularizing innovations.

“The traditional early-adopter model would say that teenagers or college students are really important to adoption,” said Andrew Lipsman, director of industry analysis at comScore. Teenagers, after all, drove the early growth of the social networks Facebook, MySpace and Friendster.

Twitter, however, has proved that “a site can take off in a different demographic than you expect and become very popular,” he said. “Twitter is defying the traditional model.”

In fact, though teenagers fueled the early growth of social networks, today they account for 14 percent of MySpace’s users and only 9 percent of Facebook’s. As the Web grows up, so do its users, and for many analysts, Twitter’s success represents a new model for Internet success. The notion that children are essential to a new technology’s success has proved to be largely a myth.
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Many young people, who have used Facebook since they began using the Internet and for whom text messaging is their primary method of communication, say they simply do not have a need for Twitter.

Almost everyone under 35 uses social networks, but the growth of these networks over the last year has come from older adults, according to a report from Forrester Research issued Tuesday. Use of social networking by people aged 35 to 54 grew 60 percent in the last year.

So there may be a path-dependence argument — that Facebook and MySpace locked up teens early.

As the parent of a tween, there was also an encouraging note: at least some teens want to use Facebook (or MySpace) to limit updates to only their friends. Perhaps they are listening, after all.

The report also quotes Andrea Forte, a PhD student at Georgia Tech, who studied social media usage by high school students. She argues that Facebook — with its additional contextual clues beyond just ext updates — provides a richer sense of identity that teens share with their friends.

Pro-Russian cyberattack fells Web 2.0 companies

It now appears that the failure of Twitter and the severe disruption of Facebook and LiveJournal Thursday were a concerted cyberattack against a pro-Georgian, anti-Russian blogger and his LiveJournal, Facebook and Twitter accounts. The attacks attempted to frame the blogger as a notorious spammer but they instead overwhelmed the three company’s servers

For example, USA Today:

A half-dozen security researchers interviewed this morning agree that Cyxymu was the target of denial-of-service attacks that got out of control

The Guardian reports

Max Kelly, Facebook's chief security officer, confirmedyesterday that the attack that disrupted the Twitter site and caused problems for Facebook and LiveJournal was aimed at Cyxymu. "It was a simultaneous attack across a number of properties targeting him to keep his voice from being heard," he said.

The blogger told theGuardian he was quite sure of the source:

"Maybe it was carried out by ordinary hackers but I'm certain the order came from the Russian government," said the blogger, whose monicker is a latinised version of the Russian spelling of Sukhumi, the capital of Georgia's other breakaway republic, Abkhazia.

However, USA Today defends the Russian government from any role

But it makes no sense that the Russian government would use a sledgehammer to squash a mosquito, says Nick Bilogorskiy, antivirus researcher at security firm SonicWall.

Bilogorskiy estimates that it took a few hundred thousand bots sending nuisance messages aimed at Twitter's servers to cut off Cyxymu's Twitter account. In today's cyber underground, it would cost about $5,000 to rent a botnet of that size to conduct such an attack, he says.

I think USA Today is one of the few places dismissing Russian government involvement in an attack designed to delegitimate a highly vocal critic of its foreign policy. As with militias, it is usually impossible for outsiders to distinguish the independent actions of fellow travelers from a concerted attack orchestrated by the national government.

Still, I agree with its point that the attackers have done a great job of making Cyxymu famous and amplifying (rather than muzzling) his voice. (The British press were already covering the 1 year anniversary of Russia’s invasion of Georgia, which went largely unremarked in the US). Fortunately for Cyxymu, this is martyrdom without having to die — almost like a failed assassination attempt.

Meanwhile, Twitter and other Web 2.0 companies will have to learn to strengthen their systems against future attacks.

Web 2.0 supply side substitutability

In the 2½ years I’ve been blogging, I’ve thought occasionally about who writes blogs, who reads blogs, what value they provide and (most of all) whether it’s something I should be doing.

Among people I know or follow, some occasionally blog with long articles, while some blog with very short referrals to existing articles and little if any marginal commentary. Others have given up on blogging and just tweet, and a handful both blog and tweet while running their day job.

I always assumed there was a self-selection involved — some people craft long pieces with words, others frenetically toss out ideas, still others have the skill to produce a YouTube video.

But Peter Whitehead of the FT Digital Business section argued Thursday that at the margins, blogging is just yet another form of social media:

[S]tatistical and anecdotal research indicated the vast majority of existing blogs had not been updated for at least 120 days and that amateur bloggers seem to have shifted to Facebook and Twitter, the social networking websites.

But surely the activity of these blogs – let alone their present inactivity – has never been of any real consequence.

Apart from a very small percentage which are informative, original or entertaining, they have little or no value. They are vanity publishing, only made feasible by the removal of costs.

The fact that their creators appear to be giving up on them is hardly surprising, given the amount of time they take to write, to discover and to read. Only a tiny proportion of any working population has this time to spare.

Worthwhile blogs – and there are many of them around – tend, according to my own anecdotal evidence, to be linked to well-known organisations able to provide time and resources, or they have become professional concerns in their own right.

I think his claim of what’s “worthwhile” is a little too narrow, since some of the most interesting blogs are from very smart people who spare a little bit of their time from their day job to share ideas. (e.g. Madisonian, or Michael Mace’s blog).

Still, what I found interesting — what prompted this blog post — was his idea of supply-side substitutability for social media. In strategy classes, we teach future managers to think about defining potential competitors not just by similar technologies, but about substitutability of demand and (in some cases) substitutability of supply.

Whitehead argues the same pool of people with the same amount of free time will choose between some very different technologies. It’s not just Typepad vs. Blogger, but Tweeting vs. updating your Facebook page. (The exception of course are blogs that are “professional concerns in their own right,” such as Om Malik.)

Interestingly, Twitter seems to be the 140-character least common denominator between many of these technologies. You can view and update your Twitter feed within Facebook, or you can convert your blog postings (via RSS feed) into Twitter postings. (Although Whitehead advertises his Twitter feed, the newsman’s feed seems to have less news content than OSS execs Matt Asay or David Wood).

Because of that, I’m a little more optimistic about Twitter than Rupert Murdoch. That may not be saying much, given how much Web 2.0 prowess he’s demonstrated by running MySpace into the ground.

Making Microsoft miserable

On the questionable Google Chrome OS plan, Mike Mace says it’s about making Microsoft miserable:

That helps to explain why Google would be pushing both Chrome and Android at the same time. If you're really serious about running a logical OS program in its own right, you'd try to rationalize those two things. But if your top priority is to commoditize Microsoft, then you don't mind pushing out a couple of overlapping initiatives. The more free options, the more pain caused.

Even more revelatory than the article was how I found it: this is the first blog post generated based on something I learned via Twitter.

I subscribe to Mike’s blog via an RSS feed to NetNewsWire, but it’s only one of 230 feeds and I’m not currently caught up (even with my two-dozen favorites).

However, on Tweetie I follow four friends’ tweets (all tech veterans), and 50% of them promoted Mike’s column. If half my tweet network thinks something is interesting, I’m gonna read it.

Update, Thursday 8am: The Merc now reports the utterly conventional wisdom that this is “a direct shot across Microsoft’s bow” but doesn’t quote Mace.

Tweet if you want Microsoft standards compliance

Tweet http://fixoutlook.org/ if you believe in the value of email standards. As TechCrunch reports:

While it is pretty much the standard email client, Microsoft Outlook has long had problems rendering HTML correctly in emails. And the latest version, Outlook 2010, due sometime in the next several months, doesn’t look like it’s going to be any better — and it actually may be worse. And a lot of users aren’t happy about it at all.

A group of people apparently felt strongly enough to create a site called Outlook’s broken — Let’s fix it. The site is simple, it’s a constantly updating stream of users tweeting out their desire for Microsoft to fix this problem with Outlook.
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Microsoft has responded, saying basically that Outlook isn’t broken and that, “There is no widely-recognized consensus in the industry about what subset of HTML is appropriate for use in e-mail for interoperability.”

Hmm, I don’t see these types of campaigns against any of the other email clients though. Expect this campaign to continue.

The website has examples of the Outlook 2000 and 2010 display for readers to compare. At the most recent count, this website (an effort of the email standards project) has attracted more than 22,000 supporters.

Feeding Tweety

I have the TwitterFeed working, and now the number of people following my Twitter feed has quadrupled (up into double digits). I’m guessing this is something that’s convenient for hardcore Twitter users.

Apparently I’m not alone, since one estimate put Twitterfeed at 9.2% of Twitter traffic, the highest of all 3rd party Twitter tools.

Interesting, Silicon Alley Insider (later copied by PaidContent and Reuters) reported Wednesday that reported that a majority stake in the venture had been sold to Betaworks (a Twitter investor) and also TAG. Betaworks has been aggressively investing in Web 2.0 startups.

One of the Betaworks investments was Bitly, which reportedly had a $7 market cap a few months ago. If that’s true, I would think Tweeterfeed is worth even more, because it has a strong market lead, while bitly is a distant 2nd (to TinyURL) in a badly fragmented market segment. (Of course, as in the Web 1.0 era, pre-revenue valuations are of dubious accuracy).

The TwitterFeed website asks for donations, which is not really consistent with a multi-million dollar seed round investment. In response to my email inquiry, founder Mario Menti wrote:

so far I used the donations to keep twitterfeed running, since it was a side-project of mine (it was never a charity as such, just not funded by anyone other than myself and whatever donations I could get).

He says the newly funded site will get a new design, new launch (and presumably as reported new back-office infrastructure), and the donation button will disappear.

Presumably the investors will also want a new business model. There are questions about the role of URL shorteners as an intermediary for web traffic, but it’s clear that many key services (today Digg, presumably someday MS, Google and Yahoo) will provide shortening services for their own content. The technology of TwitterFeed seems easier to imitate, but it would take more than a slightly better mousetrap to steal its apparently loyal customers.

Tweet tweet

During my visit last week to UOI 2009, I met with many readers of my Open Innovation blog. One of those was Alexander Schroll, an Austrian PhD student studying open innovation.

Schroll has recently shifted his emphasis from blogging to tweeting, the latter via an automatic keyword search on Twitter. For me, as a former journalist, I see myself continuing as writing articles. I’d rather write a few articles that are snapshots of history rather than share my own shallow 140-character insights. (It’s probably a generational thing — it makes me old school).

I asked Schroll if there was some way to automatically link my blog to twitter, and he recommended TwitterFeed. He noted that my friend and co-author Karim Lakhani (a user innovation and open source researcher) is actively tweeting.

I’ve set up a TwitterFeed for this and my other blogs to post to my twitter account (apparently available via RSS). While I’ll continue to read news via RSS, we’ll see if this provides useful information to regular Twitter adherents.