Twittergate and the implication of hightech competition

Recently Techcrunch has leaked Twitter's confidential documents and started some heated debates in Twitter and blogosphere. Many are calling Techcrunch unethical, but this does provide an unique opportunity to look at an hightech startup inside the tornado and their strategic thinking.

The most important leaked Twitter strategy can be summarized as:

• get to 1 billion users, monetize $1/user/year
  
• work with, but be very wary of Google and Facebook
  
• focus, focus, focus, and fend off the distractions from Hollywood and hightech pursuers
  
• determine its own identity and destiny
  
• real-time search is key for future
  

Looking at the list, it's a list of very nice problem to have for most hightech startups. Which startup would not salivate at the potential of acquiring 1 billion users? On the other hand, the $1/user/year monetization is just atrocious. Yes it's better than free, but if Twitter has aspirations to compete against Google ("doing to google what google do to others"), then they better do better than $1/user/year, since Google already earned $4 billion this past quarter without having 1 billion users.

Nothing is Free Forever

Even as the church of Chris Anderson espouses the gospels of free, Twitter realizes that "the cost would kill them if they have 1 billion users right now", and is determined to look for a revenue source. The key here for startups is that the management of revenues must keep pace with user acquisition. The current number I've heard is 40 million (including international users), so obvious that's a long way from 1 billion. The question is, when should Twitter start charging for their services?

It is also clear that many accounts on Twitter are not active accounts, so to earn $1/user/year on average, they'll have to earn more than that from the active users. So what are the potential revenue streams?

• verified accounts - for people who really want their names protected, like domain names
  
• context-sensitive ads placement - I don't know how often people look for "products" in Twitter, but this is a definitive possibility

Startups of course all know that the revenue models have to be found, and necessity is the mother of invention. Who knows what creative concepts Twitter will come up with if they can emerge from the other side of the tunnel.

Maneuver with Google, Facebook, and Microsoft

It's clear that these companies are all on collision course with each other. It seems that Twitter has the most in common with Facebook and hence are the closest competitors, but they seem to be more concerned about Google. This of course has to do with Google's new found 800lb status, but Facebook is no slouch here either. The doc showed that Twitter believed if Facebook try to become more like Twitter then they'll be un-facebook. Is that true?

The main differences seem to be

• In Twitter you just need a handle, in Facebook, you need to use your real identity or they'll hunt you down
  
• In Twitter anyone can follow and chat with anyone, in Facebook you'll have to be friends just to see their statuses
  

Can Facebook give up the above two restrictions? A lot of people put down a lot of PIIs in Facebook and might not be comfortable with allowing complete strangers to see so much about them (it's already weird to accept invitation from mere acquaintances as friends in Facebook; you might not want to anger them). But on the other hand, not everyone cares, and there is always different levels of permissions that can be implemented to mitigate the security concern (which of course adds complexity). This means it would take more resources for Facebook to be more Twitter like; but that's most likely not an issue with Facebook.

What Twitter have above Facebook right now is momentum (which Facebook also have, but in a different product category), and in order for them to maintain the momentum they'll most likely have to demonstrate the Twitter way is better, which for some situation it would be (the ease of publishing, the ease of striking up conversation with strangers, etc). The best thing for Twitter is to become as un-Facebook like as possible.

Why is Google Dangerous to Twitter

Given that search is a complementary service to Twitter, they seem to harbor more than their shares of concern for Google. Of course, every startup should be concerned about Google today as they were concerned about Microsoft and IBM before. When you are in the vicinity of the reigning heavyweight champ it would be crazy not to. But the respect paying to Google appeared to be more - could it be that Twitter's aspiration is to be in Google's space?

If their claim that "90% of the Google blog search" are all Twitter content, then in a way they have somewhat of an upper hand against Google. Witness Wikimedia - they do not give a crap about what Google's needs, and still handily kicked Knol's behind (for now). The only chink in Google's shiny armor appears to be their lack of personal touch. Google today is more comfortable and interested in algorithms than human interactions. This of course might change in the future, but when you need to go up against the heavyweight, you find anything you can find on them.

What would happen if Twitter cut off Google's scraping? They'll basically destroy the blog search product. Then Google would be forced to figure a way to acquire them or build a competitive product, which of course does not have the momentum and can easily lay the seed of antitrust.

This approach is of course a stunt maneuver, and one should not attempt without serious thinking. Twitter is doing the proper thing of paying the respect to the champ and (hopefully) prepare for the inevitable showdown, but delay it as long as possible.

Microsoft, the Wild Card

Facebook has laid a strategy to compete against Google if Twitter want to adapt - to partner with Microsoft and draw on its enormous coffers. That is a strategy that Twitter can follow, assuming that Microsoft can override sure objections coming from Facebook. It would be in Microsoft's interest to open multiple fronts with Google, and in a war of attrition Microsoft currently might still win. But of course Microsoft also have its hand tight and need to tread carefully.

Would Twitter want to antagonize Google in this fashion even if Microsoft and Facebook are both okay?

I think Twitter is doing the wise thing here - antagonize no one until you are ready to fight. That's something that all startups should take to heart, not only in the beginning, but especially when riding the hockey stick up and the outlook is rosy.

Always Have an Plan B and Focus on Your Best Customers

Twitter is in an enviable position that all startup wanted to be in - exponential growth, everyone wants a piece of you. But they also have challenges in actually earning revenues and survive with other titans of the industry, and there is always a possibility that they might not reach their goal.

I imagine in the not-too-distant future that many social network will experience desertions like MySpace. In a way, groups are herd like. They move in en masse, and they will also move out en masse. People want to find the best spot to hang out, but when the words get out and the place actually become so crowded, then the cool people will go search for the next cool hang out spot. In this regard, even Facebook, the biggest social network in the world, is also not immune to the effects.

As Twitter grow, it is definitely possible to experience this effect as well. Would all the early adopters find Twitter become having too high of signal to noise ratio and decide to find another place? If there is anything that should keep Twitter people up at night, I hope they are working their best to continue making Twitter a hospitable place for the people that led the charge to make Twitter what it is today.