Why Twitter Inc Will Fail

The latest rumor on the Twittersphere is about a possible buyout of Twitter by Apple for $700 million in cash. That is a lot of hype. Especially when we consider that even the owners of Twitter value the company to “only” $250 million. But can this holds? Following my article on Web 2.0, here is my prediction for Twitter Inc.

First of all, I have to say that I love Twitter. I think it is a really useful tool for the rapid spread of what I would call bleeding edge knowledge. It is easy to find and spread the latest news in a variety of domains, mostly through links to interesting blog posts. My fears are for Twitter Inc, the corporation behind the service.

Lately, Twitter has been opening its API like no proprietary web service before. Back in September, when I started working with their different developer tools, the only option available to me was to use an API key to make requests using a limited sets of functions. Today, with the integration of OAuth to the API and the development of other useful tools, connecting to Twitter has never been easier. It got to the point where the user has dozens of alternative to the official website to connect with its fellow twitterers, some of which are way more advanced than the original web interface or target specific aspects of the Twittersphere. Based on recent statistics, less than 75% of the users post their updates via the web client. The question is: is this a good thing?

From the point of view of the user, it is the best thing that could happen. Opening the API to developers worldwide means faster and better innovation. Twitter’s users are prosumers that don’t passively use the end product, but also develop it based on their needs. The peer pioneering behind Twitter lead to the creation of whole new services, like Twitpic, that integrates seamlessly to the main service via the open API. This means more alternative for the end user and, as a result, a better experience.

The conclusion is the same from the service’s point of view. By opening itself to the world, Twitter gains new features and users everyday, making it more useful and purposeful. Clients like Tweetdeck and Seesmic Desktop make it easy to reorganize and mash the data available on the Twittersphere, keeping only the parts that are relevant. You can easily find what is most discussed by visiting Twitscoop or automatically post with Twitterfeed. It is these services that make the Twitter service more than a 140 characters blog.

The problem is with Twitter Inc. All these API requests have to be managed by some central system, a system that happens to be owned and operated by Twitter Inc. Every request has to go through one of Twitter’s server, creating operation and maintenance costs that they have to pay to stay online. They could have tried to payoff their bills with ads like other Web 2.0 companies, but not only do they don’t display ads, but they soon may not even display any content at all. As I said before, less than 75% of the users use the official web interface. That means that more than 25% of the users don’t even bother going on the Twitter website and this number is growing. By decentralizing a system that, in is nature, is centralized, Twitter Inc is facing the risk of becoming a simple content provider for more advanced clients or at least, to lose potential profits to someone else. Even worse is the fact that its problem, the widespread availability of the content, is also its strength. Even identi.ca, a free and open source micro-blogging platform, seems to have a better business plan with its status.net initiative. So how can Twitter be worth $700 millions? Hype. But hype is not enough in the long run. With a loss of control over the distribution of its content, Twitter will have to find alternative way to start making money or it will become part of the past.

We plan to build Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.

About Twitter

I hope for them that this is not just a dream.