Twitter has finally decided to start making money. They're buying or making services and software to fill the holes in their own business plan, and they've rolled out a plot for advertising, the first stage of which is called Promoted Tweets. All of that seems to spell trouble for the existing third-party Twitter infrastructure, including developers of apps, services, and even advertising.
So why aren't third-party app developers shaking with fear?
Twitter has never been shy about plans to one day benefit from the innovations of third parities that, for a good long while now, have benefited from Twitter. Third-party developers, in other words, must have seen this coming. Even before announcing Promoted Tweets, Twitter had begun "filling the holes" in their product line. There was no mobile app, no image uploader, and no URL shortener, all of which are essential for Twitter users. So the company took a smart course and bought Tweetie, a paid app for the iPhone that many Twitter fiends regard as the absolute best around. Plus, Twitter announced that the formerly $3 app will now be free. They've also released a first-party BlackBerry app, and announced that they'll be bringing one to Android in some way.
Furthermore, now that Twitter's ad system is official, some of the third-party developers say they've got deals going for themselves.
Echofon, one of the best and most popular free Twitter clients for the iPhone, just announced that it will be partnering with 140Proof, an advertising startup for Twitter. Twidroid and Seesmic, the two most popular Android Twitter clients, will both be partnering with TweetUp.
With others, either Twitter's reckoning has yet to sink in, or they're putting on a brave face.
"Our commercial version has been the #1 paid app on the Android Market, and we're just a team of two and not burdened by venture capital," Thomas Marban, co-founder of Twidroid tells FastCompany.com. "Twitter has already made us rich, and we don't care a lot about all the whining app developers or Twitter's revenue plans."
John Borthwick of Betaworks, makers of Bit.ly, has been through this before. His was the url shortener of choice for Twitter, but Twitter dropped Bit.ly in December, and Twitter CEO Evan Williams announced plans for Twitter's own shortener at Chirp recently. Borthwick says Twitter was a boon at first but that it now represents a mere 1% of his booming business. "Innovation—building great companies—is about finding, filling and even creating holes," Borthwick told GigaOm, referring in part to Bit.ly's early relationship with Twitter. "But entrepreneurs shouldn’t—and most don’t— focus on filling holes in other people’s platforms—they should think about how to build great things...."
It's tough to imagine sunny or cavalier attitudes among other devs remaining in tact once Twitter's new ad system migrates beyond Twitter's own website and Promoted Tweets start to colonize outside apps. Most devs had a "we'll cross that bridge when we come to it" attitude or were actively seeking outside advertising already, from startups like 140Proof and TweetUp. It's those very advertising-based startups that could stand to lose the most. They have to create partnerships with Twitter clients, and they remain at the mercy of both Twitter and client developers. But if there is a case to be made for the success of major third-party ad platforms, 140Proof and TweetUp in particular, it's that both provide decidedly different products—from each other as well as from Twitter itself.
At first glance, TweetUp seems to most closely resemble Promoted Tweets—both allow advertisers to purchase search keywords and place those paid tweets into search results whenever anybody searches those keywords. But the two are actually very different—they're different for the user, and, perhaps most importantly for TweetUp, they should in theory attract very different kinds of advertisers.
Promoted Posts are, despite all of Twitter's bluster, pretty traditional advertising. They're flexible, sure, and they're highly targeted, but they're still essentially ads from big-budget companies, inserted into your search results. When you search "best coffee san francisco," you might see an ad at the top of your search results offering a half-priced Frappacino. That's better than a TV ad, since it's sort of related to your query, but to TweetUp founder Bill Gross, it's still the intrusion of a corporate-sponsored message into your Twitter feed.
TweetUp, he says, is more like a partially ad-supported promotional service than an advertising platform. Instead of plopping related ads into your typical chronological search results, TweetUp aims to bring the cream to the top by collecting opinions of experts. It decides who those experts are by number of followers and the subject of those tweets. Most of those opinions won't be ad-supported at all; tweets from experts like journalists, critics, industry insiders, politicians, and more will simply be gathered without having to pay a dime. The advertising enters the picture when a lesser-known but still credible source wants to secure more followers. That could be a small company trying to spread word of mouth, a young writer or critic, or simply someone like me who feels his insights on The West Wing are as good (better than, really) any "expert" out there. That person pays a small fee, based on number of views, and will get a bump into the expert search results. Not necessarily stuck at the top, either; the money buys increased visibility, it doesn't buy intrusion.
Another way the services differ is in the type of advertisers they target. Starbucks wouldn't be interested in TweetUp; they're not an expert source. Likewise, a young movie critic trying to develop a readership could neither realistically afford nor should he even bother to advertise with Twitter's Promoted Tweets. That's why Gross says he isn't concerned about Promoted Tweets. Considering he's signed Seesmic, a multi-platform Twitter client, and Twidroid, the biggest Android Twitter app, there's a better-than-average chance he can pull off success—assuming, regardless of Twitter ads, that people will actually want to buy what he's selling.
The story of TweetUp might be the refrain for all the other services that see Twitter as competition, including photo uploaders like TwitPic and URL shorteners like Bit.ly. Twitter is an exceedingly young platform, especially as far as monetizing is concerned. Nobody really knows what they're doing yet, and nobody's really making any money yet. That means the field is still wide open, and Twitter's fist big power grab give may leave plenty of profits behind for smaller startups and developers.