Twitter, the Yahoo! of its time

To be successful on the Web, you always have to look forward, not back. The founders of Google knew that instinctively twelve years ago when they put their faith in their own AdWords system rather than relying on banner ads served by Doubleclick for their revenue stream. Two years later, the founders of Yahoo! chose Terry Semel as their CEO in the mistaken, backwards-looking belief that a senior figure from the Hollywood media industry was the right person to lead their Web business into the 21st century.

At the time, I felt Yahoo! ought to have invested in developing its online services rather than trying to become an online content portal. And look what has happened. The company has spent the past decade squandering its investments in services and falling behind others as a content destination. Now I believe Twitter is making a similar error, looking to the past to find its business model rather than putting its faith in the future.

This train of thought was triggered by reading Nova Spivack's critique of Twitter's API strategy last week. He starts off with some thoughtful concerns about Twitter's stewardship of "a key piece of human communications infrastructure — the global short messaging infrastructure." But what really caught my eye was the following passage:

"Instead of trying to get all eyeballs to go to Twitter.com and Twitter's apps, it would make much more sense to monetize all the eyeballs that are presently looking at Twitter data in other apps and sites ... Twitter is a network, not an app. They should be monetizing the network."

I disagreed with his ensuing suggestion that Twitter should embed ads in the content stream. But I think his observation that Twitter is a network hits the nail on the head, and is a clue to the error of judgement its leaders are making. It reminded me of a similar sentiment I had outlined in a column ten years ago now, while reflecting on Yahoo!'s predicament of the time:

"Instead of trying to draw visitors from the outside in, successful websites need to be built from the inside out ... A website is not a static destination but a delivery hub, the point from which you disseminate information and services over the network on demand. Websites used to be rated by their stickiness. We're entering an era when they'll be rated by their utility."

That era has taken longer to emerge than I expected ten years ago. The trouble back then was that there was no practical means of monetizing syndicated content and services. Indeed, the only way that people did manage to monetize content feeds was by embedding ads in them, the same solution Nova Spivack last week recommended for Twitter. But the world has moved on in the intervening years. It's no longer a technologically challenging task to directly measure usage of syndicated content and services in a way that supports monetization. You only have to look at today's app stores, especially since the advent of in-app purchasing and subscription billing.

So here's the mistake Twitter is making, an exact repeat of the mistake Yahoo! made a decade ago. Twitter is trying to monetize its content using advertising and publishing models that come from the past, seeing itself as a destination rather than a network. So long as it does that, the company will continue to flounder — even if, like Yahoo! for so many years, it still appears to be popular and loved. For all that Twitter is, as Anil Dash points out, the network where celebrities as well as the rest of us love to hang out, its ability to capitalize on that is severely constrained by its lack of a meaningful revenue model. Others that look to the future and focus — initially through app stores, later on through more open syndication models — on monetizing the value built into their networks are better placed to prosper and flourish until, one day, someone's richer network ecosystem will prevail, even over Twitter.