
Twitter's descent into the extractive - zdw
http://37signals.com/svn/posts/3328-twitters-descent-into-the-extractive
======
markokocic
I don't understand why so many people are criticizing twitter for trying to
monetize here on HN. Twitter is not a startup anymore, they have real
investors and have to earn real revenue, and thus they cut everything that can
potentially affect that.

Is trying to be profitable now considered a bad thing? Is selling a startup to
big company that will close it down the only exit strategy that HN praise?

I know that some people feel betrayed by twitter for cutting something that
used to be free. But what should twitter do? Jeopardy its own business in
order to make others happy? That's not how business works.

edit: s/that/they/

~~~
ChuckMcM
I always wondering if its monetization that people are criticizing or the
path. Perhaps it is a bit of both. If people have something they like, and it
was 'free', and you ask them to start paying for it, well they are going to
grumble. And economics tells us that for some there is no amount of money they
would 'pay' to be part of the twitter universe. So those people will leave in
a huff and complain loudly.

But more interestingly for me it seems that the _way_ they have gone about
this seems like they are trying to piss people off. Their actions have the
same sort of uncomfortable feeling around them that you get when a sensitive
relative asks how you like their plaid and striped outfit. The words conflict
with the reality and its clear to everyone that is the case.

So why doesn't Twitter just charge for API access? $X per K API calls? They
charged for the 'firehose' (too much though, nobody seems to want to pay that
much) but still. It may be there is no pricing model underwhich the current
company can survive, perhaps its the tech equivalent of Hostess.

For me is it always comes back to what they want to be, what is their
"mission" statement? Is their mission to be real time news? Is it to be social
situational awareness? Is it to be a highly focussed advertising channel? A
club house? I wonder if they have a mission, does it tell them what to do
next? If not why not?

Yes, I'm just as confused by them as everyone else.

~~~
redler
I certainly don't have the answers either. But you bring up a good question:

 _So why doesn't Twitter just charge for API access? $X per K API calls? They
charged for the 'firehose' (too much though, nobody seems to want to pay that
much) but still._

Charging for API access (or the firehose) casts them in the role of a utility
-- infrastructure. So too does their diminishing tolerance, such as it is, for
"Twitter clients". One might imagine their investors prefer to envision the
company's future not as a utility-style service upon which others build user-
facing properties, but as a dominant entity in full control of all direct or
derivative revenue streams, real or imagined. A utility-style valuation is not
what they signed up for, so any lean in that direction is being corrected.

~~~
ChuckMcM
That is a credible argument. I wonder if they get trapped in the 'zero
trillion dollar market' paradox. Tom Lyon introduced that one to me, basically
it went like this, the market for one telephone is 0, the market for telephone
services for everyone is a trillion dollars, but you can't get to the trillion
dollars without first having a telephone for everyone. So its the tech
equivalent of the chicken and the egg. What paralyzes people in those spaces
is that they "see" the trillion dollar market, and they don't want anyone else
to get their first, so any progress toward it from 'not them' is shut down.
Sadly if they are in that mindset they are already dead, they just don't know
it.

Another anecdote. I was trying to create a viable replacement for the
newspaper briefly. E-readers were new, but had gotten past 'fringe.' There
were some vendors who had good hardware but not great software, one of the
vendors was Plastic Logic which had exclusive control over a process for
making flexible e-ink screens that were very durable. At the time, (and to
some extent today), that the screen needed a glass substrate meant large
format e-readers weren't feasible. My iRex Illiad V2 had the largest screen at
the time and folks complained bitterly when a coffee cup or some other modest
'event' cracked the screen. I decided that to blow the lid off this we needed
to marry a big flexible screen with a core of open source software and a new
UI so I talked with the guy at PL who helped the CEO define the overall
company strategy (well that is what he said, hard to know etc etc). The key
founders at PL were the scientists who had 'invented' this technology. They
_knew_ how huge it could be and dammit all that money was going to flow right
into their pockets! E-readers were a zero trillion dollar market and they had
showed a reader which had some really nice properties for shipping 'later that
year'. The only problem was that nobody knew what a 'real' UI was for these
things, nobody knew what the best price points were, they were only B&W and
tablets were threatening (iPad hadn't been released yet) and I said "You can't
possibly hope to out invest everyone else in making these things successful,
especially Amazon who has a built in way to make money off these things in
perpetuity. If you stay on this road you are already dead."

Obviously not what the guy was expecting to hear, after all they could do
something nobody else could! Except that geeks and freaks like me were buying
e-readers for exorbitant prices because we did that kind of thing but the
_real_ market was much lower in price, and a company trying to capitalize the
creation of an entirely new fabrication process was going to amortize all
those costs over their ability to deliver what was essentially a consumer
electronic device? You can bet all your money on one number at the roulette
wheel but its not a good business strategy.

Needless to say things played out exactly as I said they would, PL was always
just about to release or finalize their specs when the next thing dropped and
added new checklist items they needed to go back and implement, early results
with the UI were poor and the price floor fell out with Amazon pushing things
out at cost. Their reader that they thought they would get $1,000 for was
going to under perform a $400 reader with a built in pipeline of content.

Compare that to making displays and selling them. Sure its the 'parts'
business and your margins are a lot lower but you can start amortizing the
cost of your manufacturing right away. And as things start falling out in the
e-reader market you find niches that are under served and get folks to attack
those markets with your parts. You watch you learn you profit on all the
investment everyone else is doing. And then you step in with your own awesome
solution.

It would do Twitter good to embrace the utility model, then while that was
keeping the lights on, figure out what this thing was really doing, _why_ did
people value it, what did it do that couldn't be done elsewhere, and _then_
move up the value chain. But if they remain afraid that "someone else" will
get there like they have, they open the door for alternatives which will kill
them anyway. Just like Plastic Logic who you never hear about any more and
nobody had any big payday. Emerging markets are great, but they are fragile,
and missteps are more costly. I hope they figure it out.

------
antirez
It's as simple as this: it is extremely hard to do a big business on something
that is trivially reproducible (like Twitter is), just because there is a big
momentum at some point. Because the outcome is one of the following three
possibilities:

1) You ruin the experience because of the business model. People switch to a
competitor that is annoyances free as you were.

2) You ask for money. People switch to a competitor that is free as you were.

3) You invent a business model that is an _added value_ for users instead to
be a problem. You win.

To make "3" working you need to be open minded and design the business model
for months, with creativity, thinking at your users. It's hard but you could
do it, but unfortunately there are this guys that gave you millions that will
ruin this process. So "3" is very very very hard for Twitter IMHO.

~~~
chaseadam17
If Twitter were a utility, I'd agree with your points. But it's not, and
network effect on Twitter's scale is not "trivially reproducible."

~~~
antirez
Yes what I mean is that _if just the technology is trivially reproducible_ ,
if you have the network effects on your side (everybody is using XYZ), you
take the leadership as long as you don't annoy users over a certain limit. In
the attempt to make money it is easy to go over the limit...

------
mariusmg
I find it ironic to see the usual "follow me on twitter" at the end of the
post. Yeah, people will bitch @twitter but nothing will change.

Also, Twitter has 1500 employees. That's absurd.

------
fierarul
I don't understand how such a simple service is able to block 3rd party
clients. Just scrap that web site if need be!

I have an user, I can acces the site via a simple text-based protocol, who
cares what weird client I'm using?

~~~
Groxx
In part because scraping the website is going to break all the time, and
sometimes on things you simply can't see because they're running an a/b test.
Then there's usually the site TOS that explicitly denies scraping (I don't
know if Twitter does, but it's standard fare).

------
smoyer
Why are so many sites crashing Safari on my iPad1 now?

~~~
to3m
Lack of memory on iPad1 plus general lameness of Safari on iOS 5 and above, I
should think. (But mainly lack of memory, I suspect - Safari is not quite so
bad on iPad3.)

------
Void_
I'm sad that a link like this makes the frontpage of Hacker News.

It contains nothing we didn't know before, it's not interesting at all and
there's no value in it. David just talks shit about another company.

------
rdl
At least they didn't go public and tank subsequently, and their downfall looks
like it is happening before any IPO would be a risk.

Big consumer IPOs which tank hurt investor confidence across the market, and
particularly in the tech IPO sector in the future.

------
aes256
The business model is broken, the monetization prospects aren't there, and
ultimately, Twitter is a fad.

~~~
k-mcgrady
I don't think they've released much publicly but most of the speculation I
have read has said that Twitter's revenues are good. I don't find their
advertising model too intrusive either which is a good sign. And with half a
billion accounts and at least from what I've seen, more and more people
joining, it's hardly a fad.

------
joelthelion
Someone should build a decentralized (p2p-based?) alternative to
twitter/reddit.

This way we will finally have something we can settle on, we will have
multiple competing clients and no censorship or arbitrary rules, and no
monetization.

Only problem is that it may be a harder technical problem than it sounds.

------
lewisflude
Wonderfully written.

------
ed209
I wonder if jaiku.com could have kept twitter honest?

------
georgeorwell
When did the word 'extractive' become the opposite of the word 'inclusive'
anyway?

------
ianstallings
I think I'm more curious about what they need 1500 people for. That blows my
mind.

~~~
kryptiskt
An example of what they could use all that manpower for: a real, non-trivial
problem that they need to solve for a better user experience is to squash
spam. That is not a fight they are winning at the moment.

~~~
Draiken
Yes it's a very hard task, but you don't need 1500 employees to do that :p

