Third-party developers who work with Twitter worry that the micromessaging service may become a competitor
On Sept. 14, Twitter unveiled a re?design of its home page. Before, users of Twitter could see and send only text. The new look displays photos, videos, maps, and other extras in the stream of content. Users raved: A scan of Twitter updates about the redesign revealed mostly glowing comments about the new features.
Many Twitter users rarely interact with the home page, however. A whole ecosystem of companies has sprung up around the service, which allows its 145 million users to send 140-character messages, or tweets. Outside software developers have built 250,000 applications using Twitter's technology. Some are downloadable software programs that let users send and receive messages from their smartphones or PC desktops rather than Twitter's home page. Others are ad networks that help marketers reach users. Still others aggregate billions of tweets and use that database to discern trends or consumer sentiment, a field called social media analytics.
Although the number of companies building third-party applications has grown large, the vast majority of them still generate little revenue. Only about 6 percent charge users for a product, according to Oneforty, an online repository for Twitter apps. Still, some are in the early stages of creating viable businesses. UberTwitter, a mobile application for BlackBerry users, has begun charging marketers thousands of dollars for ads inserted into users' Twitter streams. Twitpic, one of a few sites that store the photos posted in Twitter status updates, says it will see revenues of $10million this year from ads displayed on its photo pages.
Twitter's recent moves have outside developers worried that a bigger, better Twitter will mean fewer opportunities for them. In April the company launched "promoted tweets," a sponsorship program that competes with ad networks like Ad.ly and 140 Proof. The recent redesign added features to Twitter that had once been the province of outside applications such as Seesmic and Tweetdeck, two popular desktop software programs.
Twitter-reliant startups are trying to divine where the micromessaging service will go next. "Now you look at an opportunity and say, 'What is the likelihood of Twitter trying to do that at some point in the future?' " says Jeff Clavier, whose Palo Alto (Calif.) venture capital firm, SoftTech VC, backed Seesmic. John Borthwick, who, as chief executive officer of New York City startup incubator Betaworks, invested in many Twitter-dependent companies, now won't consider funding startups based solely on Twitter. "It's reasonable to conclude that any feature … could be included in Twitter.com," he says. According to private-company researcher CB Insights, investors like Borthwick spent 52 percent less money supporting Twitter-related startups in the year ending in May 2010 than they did in the previous year.
Twitter is likely eyeing the nascent field of social media analytics, says Joe Fernandez, founder of Klout. His company is one of dozens that slice and dice the data created by the countless interactions between Twitter's users. For example, Klout uses data to help marketers identify the Twitter users who are most influencing online discussions about their brands. Twitter recently brought on several social media experts, which leaves Fernandez with "no doubt they're going to do an analytics product." He's preparing by building a suite of tools specialized for marketers and salespeople, niches he thinks Twitter will avoid in favor of the mass market.
One reason for the worry among developers and investors is that Twitter doesn't do a good enough job of broadcasting its intentions, says Clavier. Before the redesign, Twitter worked with 16 partners, including Google's (GOOG) YouTube. The broader developer community was left guessing whether and how changes at Twitter would affect their businesses. "What they need to do is be clear about what is fair game," says Clavier. Twitter hosts events to share information with its partners, but the company confirms that at the last one, in April, it said nothing about its upcoming redesign.
CEO Evan Williams says the redesigned home page will boost the number of Twitter users, which will be good for its partners. "People would probably use more third-party apps if we can get them started using Twitter," he says. Noah Everett, the founder of Twitpic, is optimistic that the redesign will be good for his company. He concedes, however, that Twitpic is not in the driver's seat, "Twitter owns the platform," he says. "They control it."
The bottom line: Twitter grew partly by relying on outside developers. As its features increase, however, it is competing with some of those developers.