Twitter’s Acquisition, Chirp & Managing Developer Relationships
So Twitter is buying and building Twitter clients. I don’t find this surprising at all. In fact, I said as much in September 09 at a Twitter conference in LA on a panel that Guy Kawasaki was moderating. I said in the following video that I thought Twitter would buy Seesmic, the company that makes one of the most popular Twitter clients. (If you’re interested you can watch my comments by fast forwarding to minute 31.25 and listening for about 90 seconds. There’s also a segment that I like from minute 12.30 for two minutes talking about why I think people wrongly obsess about their number of Twitter followers and had a nice little debate about it with Guy. Short answer: quality is more important than quantity).
So why did I believe it was the right thing for Twitter to acquire a Twitter client? First, I believe that Seesmic has an excellent product — especially the web version of their product and that having another senior and experienced exec like Loic Le Meur would be great for Twitter. I guess it may be impractical for Twitter to acquire Seesmic given it has raised considerable amounts of venture capital (reportedly $12 million) but the broader point for me is that I always believed Twitter should control the client versions of its product.
Think about the creative tension. If a single Twitter client could amass a large volumes of users (lets say 20m+) then the relationship with the consumer is divided between the client and Twitter itself. Ultimately to become defensible the client application would want to diversify its “stream” so would start supporting Facebook, MySpace and perhaps even IM products. I said this many times publicly before it ever started happening with Tweetdeck and Seesmic.
In fact, I encouraged my favorite IM aggregator client, Digsby, to go the opposite direction and become a Twitter client also. They have done this (they had the idea, too, so I’m not taking credit for egging them on). In a world in which you have strong client applications for consuming “multiproduct streams” then they gain relative power to any individual stream (e.g. Twitter). This also would give the client the upper hand in discussions with advertisers, image providers, URL shorteners, etc.
And aside from having great market power (the main reason for Twitter to own the client and the customer) advertising is one of the primary reasons that I believe Twitter needs to own the client applications. As people consume Twitter on mobile clients they are almost definitionally not doing so on Twitter.com. How can you offer up advertisements as Twitter if you don’t control the place where people consume their Tweets? Kind of obvious, huh? I still think that Twitter should acquire Seesmic rather than just build their best features but I’m now betting that they won’t do so. And I also think that Seesmic can carve out a meaningful position for itself as a multistream provider.
But wait, aren’t you the guy who invested in Ad.ly, the in-stream advertising company? Aren’t they going to get squashed as Twitter starts to focus more on advertising? No, I don’t think so.
Two things:
1) when I invested in Ad.ly I made sure that their thesis was in-stream (as opposed to being a side-bar advertisement like Google AdSense). I believe this is important because it means that Ad.ly is integrated with the content while being specifically denoted as an ad. So the ad appears wherever content is consumed. It also means that the publisher (person writing the status update) can share in the monetization. It also leads to higher CTR’s (click-through rates) than side-bar advertising in all of the tests we’ve run.
2) I also clarified that the strategy of Ad.ly would be “multi-stream” ad network (e.g. not just Twitter) and we’ve made huge strides in that realm that will be realized and then revealed over time.
So I agree with Fred Wilson’s post that startup applications shouldn’t simply be plugging in minor feature gaps in Twitter’s offering. Or if they do they should do so without raising venture capital so that they can still be acquired for reasonable prices. Actually, the latter could be a reasonable strategy for super technical entrepreneurs who can sustain themselves without big financing needs (see: Atebits, owner of Tweetie). I articulated in a previous post that startups should not treat the iPhone as a business but rather as a channel. The same is true of Twitter, and as a VC I would personally never fund a company that looked to simply plug a functional gap in Twitter.
So how does this all relate to the upcoming Twitter Chirp conference next week? I think Twitter made a minor gaffe by announcing their Blackberry app and their acquisition of Atebits (Tweetie) before the Chirp conference. My rationale is that I think they’ve set the cat amongst the pigeons right before their most significant conference to date and I think this discussion might subsume anything else that they wanted to be the centerpiece of the conference. From a PR perspective I would have made those announcements 2 weeks after the conference. But in the long run this will all be forgotten, I’m just sayin’.
But what should Twitter now do at Chirp and how should they treat the community? I think there is much that they can learn from Salesforce.com. And I saw a lot of this first hand in Salesforce’s acquisition of my company, Koral, which was a content management company. Naturally every other CMS company was pissed off and felt that they had wasted all of their investment in integration with Salesforce. Immediately after the acquisition we held meetings with all of the integrated CMS vendors and highlighted to them which bits we were going to make our core platform and which bits we weren’t planning to offer ourselves. We didn’t have the resources to do it all. Specifically we encouraged vertical applications like financial services and healthcare. We asked them if they would use our CMS API’s and encouraged them to partner even more closely with us. In retrospect we could have also encouraged corporate video integration more.
And Salesforce did this more broadly in all of their key areas. Salesforce was very good at managing the 1-year roadmap so at any point in time we had a pretty good idea about what we would be developing and what we wouldn’t. We also knew what we wanted to build but wouldn’t be able to get to. Often these were things that would make Salesforce more competitive vis-a-vis Oracle and Microsoft. Salesforce was excellent at outlining to the developer community what they considered “core” and what white space they wanted filled. If they gave you the white space you knew you had a good period of time to build a business without being boxed out by Salesforce and you knew that Marc Benioff was likely to highlight you at a conference or with journalists. Importantly, all of this was done privately, as it should be.
So if I were running Chirp that would be my top objective. I would want to hold up a “high level” road map of what Twitter views as important to build themselves while being careful not to step on existing businesses in the short term. I say “high level” because Chirp is obviously now a major and quasi public event so they can’t say anything that they expect to stay confidential. As important as talking about the roadmap will be marketing the white space that they don’t plan to fill. They should make clear statements about areas that they don’t plan to build in the next 12–18 months and areas that they would like to see be built. This should be as public as possible.
The other thing that Salesforce is genius at is using these seminal events to market success stories of their developers. Salesforce’s annual DreamForce conference holds sessions for their developers to market what they’re doing to potential customers and partners. They have employees who know these apps sit in on the break-out sessions and talk with customers, analysts, journalists and VC’s about why they love that particular area. The validation from Salesforce.com helps tremendously.
And finally, the most important meetings will be post Chirp. I think that Twitter has a responsibility to quietly reach out to vendors who might be in their crosshairs in the next 6 months and warn them that this might happen. An obvious example would be URL shorteners, photo sharing or video sharing platforms, Twitter authority platforms or whatever else Twitter has in store (I’m not privy to this so I’m not implying that they will move into these exact areas). Having a quiet chat that “we haven’t made any final decisions and may never move into your space but it is on our short-list of areas that are likely some day. We wanted to give you advance notice to help you pivot if you choose to. Here are some areas that we won’t likely touch that we would encourage you to consider.”
At Chirp I would say, “Look, there are times we’re going to build functionality that conflicts with what an application developer has built. Other times we may make acquisitions and almost every acquisition leaves some company needing to pivot in a different direction. Our promise to you is that we will do our best to communicate with you often. We will be direct and forthright. Where possible we will try to signal the areas we hope to own one day. But in any platform community this happens. We care about all of you and will do our best minimize the fallout to anybody.”
If Twitter wants to build a long-term, health, happy ecosystem this type of approach will suit it well.
