Twitter And The API Decision

You might have read or heard about the Twitter brouhaha last week.

Image representing Twitter as depicted in Crun...

Image via CrunchBase

No, not another politician sending pictures of his undies.  Twitter announced that they are going to restrict the use of their API and due to that a bunch of companies are going to have big problems.  While I realize that this entire discussion might be a bit of inside baseball for you non-tech business folks, I think the decision Twitter made is instructive no matter what business you’re in.

Basically, Twitter announced a bunch of restrictions on the number of times an application can access the Twitter stream.  You can read the details on Twitters developer blog but suffice it to say that anyone who makes a traditional Twitter client – Storify, Echofone, TweetBot, etc. – is going to have some issues.  These folks compete with Twitter’s own app (both the regular Twitter client and TweetDeck, which they own) for ad dollars and part of what Twitter announced was the division of the Twitter world into four quadrants.  One of those is “consumer engagement” and while Twitter is trying to encourage competition and business building for analytics and B2B, it wants to ” limit certain use cases that occupy the upper-right quadrant.”  In other words, restrict anything that interferes with their ad-supported business model.

I understand why Twitter is doing this.  After all, it’s their data (even if the users are creating the content).  However, I think they’ve got it backwards.  Rather than protecting themselves in a very difficult, competitive area (ad sales), maybe they should have focused their revenue efforts on the folks who are making money themselves (the analytics and other B2B guys).  They’re saying they welcome development on their platform as long as it avoids their core revenue model, which is consumer experience enhanced with advertisements.  In my mind, setting up a bigger toll booth in front of the folks who remarket the data for large fees makes more sense.  It’s the Willie Sutton rule – go where the money is.  Twitter has no competition when it comes to the folks using their data to drive their product while there is plenty of competition in the ad world – Twitter isn’t yet a “must” buy.

That sort of decision-making comes up in many businesses from time to time and I think a long look at what Twitter chose is instructive. What do you think?

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