Innovation in Software

I like Twitter. I like it enough that over there to the right of this blog under top posts is an import of the Vagueware Twitter feed where I mostly share articles I’ve just read on the Web. I have a personal twitter account as well, and find it invaluable to keep up with friends, peers and colleagues. I do not ask inane questions like “what is Twitter for?” or “is it any good?” like some commentators. I love the platform. It’s great.

I am however completely confused by their business strategy, and the news that they’re raising more capital from VC funds. This quite frankly makes me mildly angry that they’re screwing things up for themselves – and perhaps for the rest of us too.

Here’s a couple of facts to mull over:

• They are hitting the mainstream in a big way. In the UK, celebrities like Stephen Fry and Charlie Brooker are in on it, and Fry even discussed it on Johnathan Ross’ show, the most watched chat show in the country. Even the nefarious money-grabbing sweatbags that promote Britney Spears have advised their client to get in on the act.
• Despite the fact their UK user base was prepared to hand over cash to buy credits to support it, Twitter withdrew outbound SMS notification (direct messages and replies sent to your phone) in 2008. People screamed about this. I’m amazed somebody hasn’t monetised the demand for the service already and built a tool via the API that does all this – perhaps everybody who has thought of doing it is incredulous that Twitter aren’t doing it themselves.
• They have no business model right now. They generate zero revenue. They are burning cash.

So, they’re talked about in the mainstream press, people love them, people want to give them money, they’re not taking it, and now they’re taking VC funding to stay alive.

Think about that for a minute.

It’s not just me, right? They are insane, yeah?

This is the time to build monetisation options onto the platform. SMS credit packs, extra features in ‘pro’ accounts, heck put some fricking advertising in everybody’s feeds if you think it’s 1994, we don’t mind! Here, I have a tenner in my wallet, just take it! Take another next month, I don’t mind!!

To turn down a $500m acquisition bid, seek VC investment at a $250m valuation and do nothing – absolutely zero – to build revenue is the sign of a company run by people who don’t realise they’re running a company. They seem to think this is a hobby and somehow the money will just keep on coming.

This is dangerous for all of us interested in twitter or the web industry in general.

It’s bad for users because they are increasingly loving the platform, and this strategy puts the availability of the platform at significant risk. Servers cost money to keep turned on. Eventually the money will run out. Users will not be happy.

For those of us in the industry, it’s even worse: when Twitter goes to the ultimate fail whale, it will completely destroy any chance for us to open up liquidity in the VC or loan markets any time soon. It will be so high profile a failure due to its “success” there won’t be an investor on the planet who doesn’t hear about it and think “well, if they failed, what chance anybody else in the web industry?”. They are effectively playing Russian roulette on behalf of the entire industry. Thanks Twitter, you $!**&@!! morons!

I’m really hoping whoever is on this round of funding is going to insist on a clear revenue plan soon. Companies exist to make money, and right now Twitter only seems to exist to see how much investment they can take. This is bad news all round.