Twitter upsets its developers...and the devaluation of apps

Twitter used to be a "joke" in that it didn't have a business model. Well, it has one now. It said that it will start to promote ads in Twitter streams.

Twitter Has a Business Model: 'Promoted Tweets' - Advertising Age - Special Report: Digital Conference 2010

A single ad will appear at the top of a search. That ad is itself a tweet, and users can "re-tweet" the ad to pass it around, make the ad a favorite or reply to it.
Tweets as ads
Not surprisingly, Twitter's first advertisers, Starbucks, Bravo and Virgin America, are also heavily into Twitter as a communications medium.

The Geekorati aren't sure about it. Robert Scoble made the point that "I put a lot of value into Twitter but I don't get paid by Twitter. I doubt I'll see anything from these new ads."

And he's right. Twitter is nothing without content. And as users that's what we like about Twitter -- its content.

For a power user and a keen promoter of Twitter, Robert Scoble hasn't been paid by Twitter yet he has done a heck of a lot to promote Twitter. Without people like Robert Scoble and his 33,154 Tweets, Twitter wouldn't have the traffic to attract advertisers.

Should he share in Twitter's revenues? Should other Twitter content creators share in Twitter's revenues?

Similarly, Twitter's success owes a lot to the army of app developers that created Twitter desktop and mobile clients, and created a support ecosystem of url shortners, photo hosting sites, etc. Yet Twitter is now competitng with those app developers by purchasing some of the app companies and with plans to build new features into its platform that will most probably obsolete some third party apps. Twitter is vacuuming up all that money it left on the table and that Twitter apps companies tried to monetize. But Twitter's recent acquisitions have shocked its app developers and now there is a movement among them to try and create an open-source Twitter platform.

Yet Twitter's willingness to compete with its apps developers shouldn't have been surprising. After all, it has investors and it has a fiduciary duty to maximize profits.

But there are consequences to its actions. It will result in all apps developers becoming very suspicious of all other platforms and their owners. This will chill the rate of all apps development.

And that's a potentially good thing for Twitter because any rival platforms will not have the same mass of developers helping those platforms drive usage.

Apps and media...

There is also another trend -- the commoditization of apps. The hundreds of thousands of apps developed for iPhone, Android, Facebook, Twitter, iPad, etc, has created a perception that apps are plentiful and thus have less value.

Yet apps development has become more complex because there are a multitude of platforms and thus development costs are rising.

The issues facing apps developers are very similar to those in the media industry -- content is expensive to produce but it's consumed for free. Apps are expensive to produce but are consumed for free (mostly).

And as in the media industry, the media aggregators seem to be ones that make the money, which in this case are the App Stores, which take a cut, or the platform owners, which use the traffic generated by the apps to sell ads. The app developers, like the media creators, earn crumbs while the aggregators make the millions.

What's the solution?

I think that just like in the media industry, media becomes the loss leader, you have to have something else to sell.

In the apps world, apps become the loss leader, you have to have something else that your app is helping to sell.