Twitter and its approach to innovation
Twitter is planning a new line of business to make money out of its data stream, and I can’t help but see in the move the same approach to innovation that has come to characterize the company: create an ecosystem for developers to work on new ideas, see which does best, buy it, and then expel the rest.
This is a pattern that has been repeated over the course of Twitter’s history, and that has allowed it to incorporate new ideas developed by communities of users or companies it has generated at different moments: the development of the app for each successive platform saw Twitter encourage competitors to work on their own versions, one of which it then bought, converting the firm in an official client. It was the same story with geolocation, with the inclusion of photographs, with URL shorteners, video insertion… and with many of the other functions that we see on Twitter.
And once again, it’s the same story: for years the company has encouraged the growth of dozens of companies dedicated to analyzing its data. Finally, in August of last year, it bought competitor Gnip for 134 million dollars. Since then, the company has simply allowed its deals with former partners to expire without renewing them: the last, DataSift, will see its access to Twitter data disappear this coming August 13. Finally, it has announced that Gnip will have the exclusive on exploiting this data, further proof were it needed of the growing importance of big data as a source of business.
This is business as usual for Twitter. My question is just how sustainable these practices are in the medium to long term: Twitter’s innovation depends in large part on the progressive demands of its users, and the way the business community is finding ways to meet them through products that are created within an ecosystem generated by the company. The company’s strategy is essentially one of cherry picking: it choose the best option and buys it. Some of these acquisitions have been absolutely crucial to its future. From an innovation point of view, this is an unbeatable formula for exploiting its ability to generate a platform, an ecosystem that attracts the attention of third parties.
For those who decide to develop activities on the platform, it is clear they are engaging in a risk sport: after creating and consolidating your line of business, you are either chosen to become part of Twitter, which has clearly developed a skill at buying out companies and holding on to most of their workforce, or you are just waiting for it to kick you out and exploit your line of business itself.
Entrepreneurs such as Loïc LeMeur, who spent several years trying to develop products around Twitter with Seesmic and constantly pivoting to adapt to a changing platform, this is nothing new. But I would say that he’s probably not that keen to repeat the process. As an innovation formula, the strategy as borne fruit. But could Twitter, at some point in the future, find that it has alienated the community of developers and entrepreneurs it relies on to the point that even new entrants decide working with it isn’t worth the risk?
(En español, aquí)
