Another late night post after a evening kicking a ball around a five-a-side pitch 
Have been thinking for a while about Facebook, Twitter and the likes, i.e all the big networks which are trying to make money. Now we all know on the web there are only two ways of really making money
a) The user pays
b) Someone else does (i.e advertisers)
Lets look at ‘b’ since this is where most of the “large” dotcoms sit/used to sit. If you look at Google, it doesn’t really have a closed network as such, all it does is to take data from elsewhere, do some magic, and then return some results. These results we use, and someone else pays to be viewed alongside the results. Now in the case of Facebook, they use their OWN data, and not created by others, by their own, I mean created within their walled garden, same with Twitter, the data is created using the Twitter platform.
Both Facebook and Twitter differ from Google here, Google uses the roads that others built, and adds value to that, Facebook and Twitter are using their own roads, i.e they are trying to build the railroad, but also the services on top to monetise them.
Again and again we here of how Facebook and Twitterwill make money, I am unsure of whether this is a good idea, not the money making, but the how.Facebook and Twitter need to make the roads better and bigger, allowing people to do different things on them (call this opening the walled garden or whatever), the money will be made with the people who use these roads, Twitter and Facebookshould be partnering with these companies in a new type of funding scenario, i.e we will focus on the road building, you guys come up with ways to use it, and together we both make money. Google did this well, it used existing roads i.e websites that were built, and built a business on top…and now its stuck, because its own search engine is now becoming a road in itself, but they cant keep squeezing money out of it, what they need is to let others build on top of that.
I am sure lots of people are confused between the road analogies, but the way I look at it is , roads, railroads were built centuries ago, but the real money being made from them came much after, by the people using them, the same is true with Facebook, Twitter and even now Google, work out whether you are a layer using the roads, or the road themselves.
As a summary, Facebook and Twitter need to make there platforms better, and partner with companies who use their data in order to make money, for them and also for the partners, if they try to both together, i.e create the platform and enhance it, AND try to use the same platform to make money, I think they will hit a deadend, and user’s will move off. We want new things all the time…..
Iqbal Gandham (aka feelin_tired)
- Building a startup in 30 mins (well 41ish) – Iqbal Gandham - December 3, 2009
- Should Facebook and Twitter bother to make money? (Iqbal Gandham) - February 17, 2009
- How we got Nivio to Davos (WEF)…and won - February 5, 2009
I am not against twitter/FB making money, but its the how that I am saying should change.
They should not defocus on what got them here, else people will start to leave, they need to keep building and making the platform better, whether its reducing downtime on twitter, or cleaning FB up again, maybe adding a few value adds, the IM in facebook. But at a certain point they should stop, and all that VC money which pumps into these two, should then be sent with there blessing to other startups who are building on top of twitter, eg tweetdeck for twitter.
The way I see it it is these apps which will continue to enhance and incerase the uptake of these two, but for the main entity to do this will require them to de-focus, if they partner with new startups, they not only make money (i.e if tweetdeck does), but also expand /extend user base, without losing focus.
From a VC point of view if you had the choice of
a) funding a startup
b) funding a startup which has a “special” relationship with the parent,
which one would they choose.
To me this is more advanced that the vanilla API model, the “special” part is access to parts of the core that the traditional API wont allow, and also working closer with the parent teams.
Iqbal
Raison d’etre of a business is to make money. Sooner the better.
Nothing compensates for making good money. No users, no statistics and no VC. nothing.
Considering that Twtr would be completing 3 years this march – I think its high time they start making money. They already have an AD looking for a Business Product Manager to commercialize some of their apps (read services built on top of Twitter)
Personally I think Twitter has a much better chance at making (a lot more money) as opposed to Fb – simply because of the fact that organizations and individuals have already realized/actualized revenue generating services off the Twtr platform — Fb on the other hand is still languishing on the old model of – you advertise and I’ll you ‘social/behavioural’ data – and there is not much room for improvement there.
Interesting point: FB and Twitter to participate in equity of some partners who make money off the platform. Microsoft did that through the nineties – a lot of the stuff you see as part of the windows platform today was provided by different vendors (who made money). From device drivers to networking tools to file-sharing programs to backup software – Microsoft simply bought them out or told them they would build-and-bundle the same thing and put them out of business.
FB and Twitter could do this, apart from the bullying of course. (They don’t have the monopoly) There’s a lot of stuff built on top of twitter, like stocktwits, or graders etc. using just the api provided; and the same with facebook. FB though isn’t as capable of business provision as Twitter is, IMHO.
But unless someone’s making money – and afaik, very few are – nothings going to help….
What you are describing is the commercial API model, a very powerful business model for companies that are able to structure large amounts of data and organize access to it for people to use effectively. Thinking of it that way may make your argument much less confusing.