The total unadulterated idiocy of building software businesses on the shell of Web 2.0

Last Wednesday Duncan wrote up a post questioning the motives behind Twitter’s slashing of their API access to third party developers who are thinking that they have found the road to riches. His supposition was that Twitter could be looking to make a play for pay services that duplicate what is already being given away

It’s not inconceivable that Twitter might offer a “premium” account along the lines of what Flickr offers, say $50 for two years. As part of that account, you might get similar services to what is offered by Qwitter and SocialToo, services I might add that are both logical extensions to Twitter, and perhaps long overdue.

Twitter’s problem though is that 3rd party service providers offering this functionality for free would undercut a premium offering along the same lines.

As some-one who at one time developed a Twitter client I have watched the space with both the eye of a developer and the sarcasm of a sceptic. Not so much a sceptic of Twitter itself; even though I still wonder how long it can last without a provable revenue stream but rather the idea that seemingly sane people think that they will be able to build a sustainable web service business on the backs of other Web 2.0 company’s API’s.

There doesn’t seem to be a day go by that we aren’t seeing yet another Twitter appendage being announced to the world as if it is just the greatest thing yet to come along. People seems to be verbally salivating over applications that like the host they are sucking off of don’t have a business plan. How is the money going to be made here folks with all these free services that need a host free service in order to even be useful.

When even long time applications that have been the base of the Twitter ecosphere only proved to be profitable because it got bought up by another Web 2.0 free video service. Twhirl was one of the first AIR applications that came out as a Twitter client. I was still working on TwitBox at the time and yet the only reason the developer behind it made any money was because he sold Twhirl to Seesmic – who by the way as far as I know still is living off of funding itself.

So when one of the premier client apps for Twitter is only profitable through a sale what does this bode for the rest of the conglomeration of day old web services that are trying to attach themselves like lamprey to the side of services like Twitter. Do they really think that they will be able to expect the same pay out as Twhirl? I doubt it – seriously.

Like Duncan pointed out Twitter will need to find some way to survive because at some point those VCers are going to want their pay-outs. This leaves Twitter with little choice really as it moves forward – it has to start coming up with reasons for people to pay for the service. this means it has to start shedding the freeloaders who are hoping for the magical payout. As Louis points out in a post

So now, Jesse and others are faced with a tough situation – is it even possible to optimize their code? Should they ditch Twitter as a development platform altogether because the company treats them like leeches instead of celebrating their efforts? Jesse asked in an e-mail, “Why develop for the Twitter platform any more if we know we can only grow to your limit?”, adding one option for him may just be to exclude the most popular users outright to reduce stress on the system

Well I can tell you the first mistake all these developers made was thinking that Twitter was going to be a development platform. Anyone who thought that long term that Twitter would be able to support a whole boatload of leeches needs to think again. As for the question why develop for Twitter who the hell else are you going to develop for? Really … Twitter is a one trick pony and every single application that feeds off of it is exactly the same – a one trick pony. It’s not like there is anything else that Twhirl can do other than feed off of Twitter or FriendFeed. As for things like SocialToo, MrTweet, TweepSearch or any of the hundreds of related blogs and services that revolve around Twitter and FriendFeed what future is there?

None. Zip. Nada.

Everything out there that is related in anyway to things like Twitter and FriendFeed are building on an empty shell. It is a shell built out of VC dollars with the idea that advertising would make everything Google size profitable. Well we can see how well that is working out and you can bet your bottom dollar it’s going to get worse over the next year. The idea that in the current state of the web industry that it makes any sense at all let alone business sense to build on top of something that will either cut you off at the knees or collapse in on itself is nuts.

As Rob Diana pointed out recently this cutting off at the knees isn’t being limited to the small boys like Twitter. It is also happening with companies like Google

Twitter is not the only one doing this either. Google has also recently done this for their Google Apps product.

When Google Apps first launched up to 200 user accounts could be created for each business under the free version. But that limit was quietly reduced to just 100 user accounts. And then when the reseller program was announced earlier this month, the limit was cut in half again, to just 50 accounts.

Obviously, this is bad for the users and good for Google. However, lowering this limit is devaluing the service that Google is supplying. Sometimes a company will have a promotion when first launched where the account limit is temporarily raised, but it is also known that it is temporary. In Google’s case, the Apps offering has been around as long as Twitter has. So, it is not the case of a quick change, it has been changing over the course of years

When the King of Free begins to change the rules of the game that the very nature of Web 2.0 is based on what makes you think that your cutesy Twitter appendage is going to survive. You know you can’t charge for it because that would send everyone running in the other direction. Do you really think that what you are adding to the mix is so unique among the growing pile of apps that you’ll be able to sell it. Not likely. Even though Twitter bought up a Twitter search engine because their own sucked that doesn’t mean the same thing will happen again – not in this economic climate. Nope, they’ll just be force to copy what is already being done leaving you kissing your cute little app in the wind.

The really sad thing is that all this effort has probably divert people from creating real businesses and real services that people would probably be willing to pay to use because that tide is shifting – free is not what it was – trust me on that.

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