July 18, 2008

Is There A Way Back From Free?

Guest Post By Colin Walker (Twitter/FriendFeed)

On Wednesday, Matthew Ingram posted a reaction to Mike Arrington's interview with Twitter founder Evan Williams with regards to the way Twitter is just handing their data to potential competitors for nothing.

It has seemed obvious to me for a while that an ideal aspect of a business plan for a social networking service such as Twitter would be to charge partners for premium access to the API, but once you have started down the free path, is it possible, or wise, to backtrack and start charging?

At the inception of a service, the desire is to gain popularity as quickly as possible - the API allowed Twitter to gain this popularity - the openness fuelled a separate ecosystem and Twitter usage spread far beyond what the service would have been able to generate on its own. At this stage charging for access would have stifled the creativity surrounding Twitter and the vast majority of third party apps would never have existed.

The question becomes: who would want to use the data from the Twitter API so badly that they would be willing to pay for it?

Let's look at the four companies allowed access to the full XMPP data:
(prior to this morning's announcement with GNIP)
  • Summize would never have existed in its current format and would be pointless with only limited access to the API
  • Twittervision is merely a mashup and the developer would, no doubt, have never gone this route if there was no free access
  • FriendFeed itself also has no obvious business plan so where would the incentive be to spend money it doesn't have?
Perhaps the only company with full access that may consider paying would be Zappos but only because it is a "real" (if online) business rather than a social media startup. As Evan alludes to in the interview it is the distinction between commercial and non-commercial use that is the potential driving factor here.

The web can only exist on the handouts from VCs for so long before someone, somewhere starts demanding a return on their investment. Where is this going to come from?

So, is it possible to start charging for access?

The news that Twitter have limited unauthenticated calls to the API as well as authenticated calls could well be the first step on the road to pay-per-play but who should or shouldn't be paying and can Twitter now justify a shut out of this nature against the revenue it could potentially receive?

How many third party tools will wither and die? How many developers will quit before their project ever sees the light of day?

When I wrote about Twitter shutting off the Replies tab in favour of keeping the API open I queried if this was the most sensible route - why restrict your own application to protect those of others? The argument was that Twitter receives ten times more traffic via the API than it does from the web site so, as Duncan Riley commented, why "would you willingly block half your user base?" isn't that what restricting API access is effectively doing?

This information came from an interview with Biz Stone in September last year in which he also explained:
the API becomes not only crucial for us on a creativity level and something that we can offer to the developers so that they can build their own applications and experiences, but it also becomes a way for us to grow and a way for us to potentially - depending on what business model we choose - do well there, business-wise (my emphasis)
The constant denial that Twitter knows where they are heading with their business model seems at odds with the constant messages we get when we read between the lines. Even back in September it was viewed that the API could be a money spinner. The moves to restrict API access, in my opinion, are reinforcing that message even if Twitter themselves argue that they don't know where they're going.

As Bob Dylan said: The times thay are a-changin'.