Since I've written about the business models of social media (with much nay-saying by some of the comments I've received), you might not be surprised that I was taken aback this past week when rumors flew around about Google buying Twitter. Aside from the back and forth about whether blogs or serious journalists were better at reporting the story (i.e., TechCrunch which broke it or Kara Swisher who said this was nonsense).
Whether or not Twitter gets sold to Google, or whether it gets valued at more or less than $1B, this will likely be a bad financial investment for Google, or if it isn't, its probably a bad deal for you. Here's why.
The basic idea behind this whole discussion is that Twitter search is the new frontier and will be the future of search in general. Therefore, Google (the king of search) wants to make sure it owns this property (or would purchase it just to keep it out of the hands of Microsoft). Most of the discussion I've seen about this is about synergies, antitrust talk and "business pundits" who advocate one or the other search giants to "snatch" up Twitter.
All of this sounds good if you think that most of the world will be interested in searching Twitter posts rather than searching the internet. Personally, I don't. But that's not the point.
The problem that seems to be dismissed in all this talk is that Twitter was consciously helped along in its tremendous growth by a whole bevy of independent developers and a host of APIs that allows these developers to make cool applications that people, like you, use.
So, while people talk about whether Google's AdSense (i.e, paid search) can make enough money on Twitter (since it doesn't make that much money on MySpace, evidently), few are talking about the how the openness of Twitter changes these dynamics. An you can bet that if Google buys Twitter, paid search is how they'd monetize it (since that's its main business model).
Right now, for example, even I can write a cool little copy of the Twitter search function by simply using their APIs (which is something you could never do with Google). Try it out here. If text ads were splashed all over the Twitter Search page, I could make my site free of ads (and with a little viral campaign, get lots of people coming to my site instead of Twitter's site). Even without this, the APIs allow iPhone and other mobile developers or widget developers to bypass the web site and do the searching on their applications.
So, what's a Google (or Microsoft) to do if it wants to monetize Twitter search? Close down the APIs. Hmm, what incentive, then do developers have of making applications that rely on search anymore? You think developers will like having open access yanked away from them (the old "bait and switch")? Oh yes, I guess Google might be able to stick ads in the search stream instead, but it's trivial to strip out ads using simple code.
No, my bet is that the APIs will get restricted, using restricted terms of service, etc, and thus the makers of cool applications you use now (TweetDeck, etc.) will start to think about how they are not making money but text ads are appearing in their applications. Of course, maybe developers will get free access, but only for a fee, so get ready to shell out some real money for Twitter apps in the future since those fees will be passed along to you - the user.
Another way Google could use its paid search tactic is to put it all over your Twitter home page. Wouldn't that be nice? The clean page that you control by putting up your nice pictures and personal branding information, will be plastered with paid search ads (a la MySpace).
I would like to see Twitter find a business model that works (although I'm still skeptical they can find one), and I think that the statement on their site, namely "Our goal is to build a profitable, independent company and we're just getting started" is a great sentiment. I don't know how they're going to do this, but if Google (or Microsoft) buys them, watch out for less functionality in those apps you love, higher prices for those apps, and lots of ads plastered around your pretty Twitter pages.
Take the first step (it's free).
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