App makers and Twitter feel strains

By Claire Cain Miller, New York Times | Updated: 15 June 2012 13:55 IST

Highlights

The relationship between Twitter and the outside developers that build its apps is a little like the one between sharks and the small fish that latch onto their backs — beneficial for both, until it isn’t.

The relationship between Twitter and the outside developers that build its apps is a little like the one between sharks and the small fish that latch onto their backs -- beneficial for both, until it isn't.

Lately it has hit rough waters. The Federal Trade Commission is investigating Twitter's relationship with the developers, and although neither Twitter nor the agency would comment, two people briefed on the inquiry said that it questioned whether Twitter had been anticompetitive when it bought or regulated some apps.

At the same time, the apps built by third-party developers have become a thriving corner of the tech industry. In the last six months, investors poured $500 million into developers of Twitter apps, while companies, including Wal-Mart and Salesforce.com, collectively paid $1 billion to buy such start-ups. According to Twitter, 750,000 developers have built one million apps, up from 135,000 developers and 150,000 apps a year ago.

The boom in apps, though, has fueled longstanding tensions between Twitter and the developers over whether they are partners or competitors.

When Twitter was introduced, the service was bare-bones. So the company encouraged
developers to build apps for things like posting photos and using Twitter on smartphones.

The apps used Twitter's technology, often free, and Twitter became successful early on largely because the apps made the service more helpful and easier to use. But Twitter can transform overnight from partner to competitor by building its own apps to do whatever the developers' apps do, or by simply acquiring a developer's app, which it has done several times.

To try to mend its relationship with developers and encourage them to keep building apps that improve Twitter, the company is inviting them to town hall-like sessions, and last Monday it unveiled a developer Web site with a blog and discussion forums. Twitter's chief executive, Dick Costolo, has personally called some app developers to reassure them that Twitter does not intend to tread on their ground.

The argument has sometimes been a tough sell. Just last month Twitter acquired TweetDeck, a desktop application for active users, and added tools to automatically shorten links and post photos. That means Twitter now competes with other apps that do similar things, like Seesmic, Bitly and Twitpic.

Twitter has sparred with one app company in particular, UberMedia. That company, which has received a request for information from the F.T.C., makes several Twitter apps that were shut down earlier this year because Twitter said they had security problems. It also tried to buy TweetDeck before Twitter snapped it up. UberMedia declined to comment for this article.

"There's some uncertainty within Twitter as to whether developers are a help or just parasites," said Adam Green, who advises Twitter developers and builds political Twitter apps.

Joe Fernandez, chief executive of Klout, a Twitter app for marketing, took a different view. "I believe they honestly care about developers building successful businesses and they want to help us," he said. "Sometimes there are missteps, but I do believe their intentions are good."

Ryan Sarver, head of Twitter's platform, said Twitter did not communicate clearly enough early on about which apps it intended to build and which it hoped developers would build. Twitter must build consistent apps for its users' sake, he said.

"In the early days, all the clients except Twitter.com were built out by ecosystem companies, mainly because Twitter was so focused on keeping the lights on," Mr. Sarver said. "But we learned that in order for us to really grow, we had to start taking over that core experience."
The symbiotic relationship between Twitter and its apps is common in the tech world.

Microsoft, Apple, Google and Facebook grew quickly in part because they let developers use their technologies to build tools. But the pitfalls are also familiar, because the developers are at the mercy of the bigger company.

When Microsoft built memory managers into Windows, for example, it pushed aside start-ups that had built similar tools. And analysts have questioned whether Zynga, the online game maker, imperils itself by relying too much on Facebook, where most of its games are played.

Still, other tech companies have not taken the beating that Twitter has over its relationship with app developers. That is partly because Twitter was unusually open in sharing its technology from the beginning, which set developers' expectations high.

Twitter also moved painfully slowly in building its own tools, like mobile apps and link shorteners. Developers jumped in to fill the void, only to feel betrayed when Twitter eventually built those tools itself.

"These applications were what got people into using Twitter," said T. J. Luoma, who builds Twitter apps in Gallipolis, Ohio. "Now Twitter can afford to say to third-party developers, 'We don't need you anymore,' but they did need them before."

Other developers say Twitter is chilling the innovation that was vital to its early growth.
"They finally codified the sentiment that the experimentation phase for Twitter is mostly over and a lot of the innovations now are going to be coming from Twitter Inc.," said Eric Mill, a developer for the Sunlight Foundation in Washington, who built an app for tracking Congressional Twitter posts.

But Mr. Sarver said Twitter's message was the opposite -- Twitter welcomes developers to build real businesses on Twitter, but wants them to follow Twitter's guidelines. To ease developers' worries, Twitter has been advising them on which types of apps to build and which to avoid.

Twitter wants its own apps for allowing access to the service on phones and computers, Mr. Sarver said. Outsiders, he said, should instead focus on apps that help publishers and retailers use Twitter, send photos and posts to Twitter, cull relevant Twitter posts or help businesses analyze posts and use the service.

Apps for the enterprise have been particularly profitable for Twitter developers.

Wal-Mart acquired one such start-up, Kosmix, in April for a reported $300 million. Kosmix ran TweetBeat, an app that selected relevant Twitter posts about events like the World Cup. Now called @WalmartLabs, it is building a product that uses its technology to help shoppers make purchase decisions.

Radian6, which Salesforce.com bought for $326 million in May, helps companies like Dell and PepsiCo to monitor what their customers are saying on Twitter and on other social media sites and to direct the posts to the right customer service person.

Klout has raised $10 million from investors including Kleiner Perkins Caufield & Byers. It calculates influence scores for Twitter users and helps brands like Disney and Nike invite the most influential people to try new products and write about them.

"The press is still questioning Twitter's revenue model and its future, but I have never been more bullish about Twitter," said Mark Suster, an investor at GRP Partners, which has invested $12.5 million in two Twitter apps. "I'm betting with my own money and institutional money that this is going to become even more valuable."

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