Does Open Conflict With Making Money?

We had a good chat hanging around Zander's desk yesterday about this line from Matthew Ingram's post on his love/hate relationship with Twitter:

Lastly, I hate that Twitter’s metamorphosis seems to reinforce the idea that being an open network — one that allows the easy distribution of content across different platforms, the way that blogging and email networks do –isn’t possible, or at least can’t become a worthwhile business.

I asked Zander what he thought about that line and he told me he hadn't thought long and hard enough about it to have a fully formed opinion but it was certainly important to our investment thesis and we ought to have an opinion on it.

I do have an opinion on it.

I do not think open conflicts with making money and further I think there are ways to make more money by being open rather than closed, but it takes imagination and a well designed relationship between your product/service and the rest of the Internet.

I also think it is better to open up slowly, cautiously, and carefully rather than start out wide open and then close up every time an existential threat appears on the horizon.

I recall when Etsy first put out an API. It was a read only API. Then they made it read/write. Over time they have added a lot of features that have made it possible for third parties to add value to Etsy and Etsy's sellers and buyers. But they have always protected the essential things that make Etsy's business and marketplace work and hang together as a sustainable entity.

Contrast that with Twitter which started out completely open which allowed anyone to build a third party client, grab a huge percentage of Twitter users, and then threaten to take them away from Twitter. That's not a sustainable relationship between your product/service and the rest of the Internet.

So I do believe that there are many ways to be open, to become more open, and to do so in ways that enrich the overall Internet and your company too. I am quite fond of O'Reilly Doctrine:

Create more value than you capture

And I think doing so means being open, becoming more open over time, but always in ways that allow you and your company to remain a sustainable business that can cover its costs and then some and remain viable and value enhancing for the long haul.

#VC & Technology

Comments (Archived):

  1. reece

    do you think Twitter would have been as successful as it is had it taken the path that Etsy did? perhaps in a more sustainable fashion?do you think stands a chance at making a dent then?

    1. Julien

      I’d argue that as of now, is not more open than Twitter… It’s not because you pay that you actually own more data =)

      1. markslater

        yes you do – read the projectVRM list for amazing insight on Its not truly open for sure. to borrow from craig burton:———-There are really 4 categories for the API provider (think product not consumer)The API is the product. (Twilio)The API projects the product. ( API promotes the product. (Open Platform)The API powers and feeds the product. (Twitter and Facebook) is struggling to try and do something interesting, be an Open API provider whose API both powers and feeds the product at the same time as projecting the product.It is way too early to tell whether the company will be successful at this approach.————-Its early days but will be fascinating to watch imo.

    2. Chad Dickerson

      I have a strong opinion on this! Before joining Etsy in 2008, I ran the Yahoo! Developer Network. One of the challenges with most Yahoo! APIs (say, search) was that the business model was typically based on advertising. Unless APIs carry an ads payload (which doesn’t generally happen unless something has changed), open APIs in advertising-based models tend to suck revenue away from the core product, which becomes unsustainable. In the case of Etsy, our API supports marketplace activity — helping sellers sell and helping buyers buy –which naturally aligns with our core business model, so it’s not a conflict at all. I think Twitter has the same potential conflict that Yahoo! APIs like search had.(I have no solid opinion on

      1. reece

        makes perfect sense. thanks @jchaddickerson:disqus



    3. falicon

      no and no.

    4. JimHirshfield

      I think Twitter would have succeeded. Users gravitate to the core offering – and would have used whatever tools were available to broadcast their message.

    5. Alan Mendelevich

      If ‘s core mission is to replace Twitter, then Twitter only has to hold on for one year (until renewal payments are due) and then if it’s still a niche geek project, then no one will renew and it’s done.

    6. fredwilson

      I think is interesting but I am not sure that most of twitters hundreds of millions of users care too much about the issues that drove Dalton to create it. We will see.Twitter’s openness was huge in the early days but there were also a ton of holes in the product like search that got quickly filled by third parties. If they had launched a complete product who knows? The didn’t and the rest is history

      1. Suraj Jain

        I don’t see catching on in any way beyond a very niche tech community. None of my friends have heard of it and I doubt they have any interest in it.

        1. FAKE GRIMLOCK


          1. Suraj Jain

            haha fair point

      2. LE

        “but I am not sure that most of twitters hundreds of millions of users care too much about the issues that drove Dalton to create it”Exactly they don’t care. As currently presented can’t possibly achieve a network effect.The name is stupid as well for this. It doesn’t speak to the masses and isn’t good for viral pickup by traditional media. Which is essential.The idea, as presented (what you can find about it) isn’t clearly communicated in a way that indicates in any way (what it is today I must stress) makes sense or could succeed.Of course, this is a great vehicle for Dalton to gain exposure for himself.

  2. Guest

    I was reading Mark Cuban’s commentary on the Facebook IPO last night and then later an article posing the question, “Did investors actually read Zuckerberg’s letter and prospectus?”I was reminded two things about Facebook:1. Facebook cares more about its social mission than business.2. Business supports product development, not the other way around.In Twitter’s case, I’m not all worried about their ability to monetize because I don’t believe they need to. Did they screw over their API users? Maybe. But they can always integrate 3rd party apps into their native interface.When you build a online platform, you get to control its future. When you invest in one, you own a piece of it. Similar to frontiersmen and homesteaders in the days of the wild west. I hope modern investors understand that web & mobile “companies” are not following the traditional/conventional business doctrines. They value the future impact of their product/service more than financial returns.

    1. LE

      “In Twitter’s case, I’m not all worried about their ability to monetize because I don’t believe they need to.”Do you really mean that?I’m curious why you believe they don’t need to monetize?Which of the below apply:[ ] They will get bought out.[ ] They will receive government money[ ] They are a non-profit [ ] They will go bankruptPlease explain.


        [ ] UNICORNS

      2. Guest

        correction: I don’t believe they need to monetize any more than they already have with current advertising/promotion revenue.[x] They will get bought out (or IPO)To answer your question, I think twitter has value by itself. It is the real-time pulse of the world. The features and speed will only continue to become better and better.A good comparison would be Instagram. There wasn’t much revenue, but there was value: a large amount of people taking pictures from their mobile phones. In Twitter’s case, there’s enough value by itself they don’t need any cash coming in other than to fund operations & infrastructure.

  3. awaldstein

    You can build it locked shut and closed, and spend all of your efforts acquiring customers and focusing on transactions.Or you can build it wide open and spend your time thinking about how to put a palatable price on community value.The best is middle ground if you can find it.I’m really curious to see where companies like Wattpad end up for monetization.

    1. markslater

      great point. Fred falls in the second category IMO. Build it open, networked, get users in – figure out business later.

      1. JimHirshfield

        Yeah, it ain’t a party if no one shows up.

        1. awaldstein

          And certainly, no one will show up if you don’t work to tell them it’s happening!

      2. awaldstein

        I’m a believer that in every business there is that hard leap.Selling the platform before there are users to your partners. Selling the value to the customers before the offering is complete.For me, I always choose creating the value first if I can feel comfortable that there’s a population that will pay somewhere in there. I’m never comfortable relying on a media model as the end game even though I’ll take it if it comes along.

    2. markslater

      flipboard as well – great tool – how do they make $$$

    3. fredwilson

      Exactly! But how you get to the middle matters too

  4. Chad Dickerson

    Great post (and thanks for the Etsy mention). Openness in products/services is important. I also think companies themselves can and should become more open with how they operate over time with things like B Corp Certification, which we did in May… I see that as providing an API to our culture and values and hope to see many more companies following suit.

    1. AlexBangash

      Hi Chad, the Link does not work. 🙂

      1. Chad Dickerson

        oops — fixed! thanks.

    2. fredwilson

      An API to our cultureSuch a great way to think about B Corp

    3. Donna Brewington White

      “an API to our culture and values”what a great concept

  5. ShanaC

    Well, I think this is largely a question about “what is twitter” – the developers thought of it as essentially an open api for strings. Turned out that it is not really that – but then what is it? And for that it – is that it open?

    1. Guest

      Real-time firehose of the global “pulse”.

    2. fredwilson

      A crowdsourced media company that is orders of magnitude more open than any other media company has ever been

  6. andyswan

    Many internet-based businesses can follow two simultaneous development/maturity paths:Closed ——-> OpenFree ———-> PaidEach as you figure out how to create more value as you move to the right. Each in its own time. Hopefully in step with each other. Always in sustainable cash position.Thoughts?

    1. Guest

      just two?

      1. andyswan

        Trying to stay simple here Charlie 🙂

    2. JimHirshfield

      I believe that starting with a paid option works well for many businesses. It is incredibly hard to charge for something that’s been given away. Much easier to lower the price or adjust the features levers. Perhaps this opinion of mine is more centered in B2B than in consumer.

      1. andyswan

        You make a great point. Plus it is really hard to tell how much value you’re creating if you don’t charge $$.

        1. JimHirshfield

          thanks.agreed on value measurement.

    3. William Mougayar

      I’m not sure it’s so simple. Reality is that it could be a combination of the 4 above. They feed unto each other.

      1. andyswan

        Good point

    4. fredwilson

      Great model if you can execute it but its hard

      1. andyswan

        That’s what we’re here for!

    5. kidmercury

      IMO depends greatly on the nature of the company. i don’t think the opposite migratory path — open to closed, free to paid — is negative and in fact i think it can be done in a way that makes everyone happy — provided the platform does so with integrity to its values/mission.

      1. andyswan

        Yes….knowing who your client is and what your product is early on is the key….a lot of companies seem to mix that up early

  7. markslater

    If you are open – and hope to eventually make money by providing a set of tools that compete for peoples attention you will have conflict. The commodity that you are selling is the quantity of users you have managed to coral in to the pen with you new and unique tool.If you are building a new tool – here is a unique concept – build with the users interests and privacy in mind. Not everything has to be about duping your user by selling their attention. It is possible – and it will delight the user if you succeed – so much so – that its my bet they will pay.

  8. LIAD

    In the same vein as the adaptation of Sorkin’s piece on FB yesterday.Contrast that with Twitter which started out completely open which allowed anyone to build a third party client, and help build their network and engagement levels grab a huge percentage of Twitter users, and then get kicked out by threaten to take them away from Twitter. That’s not a sustainable relationship between your product/service and the people who helped build you to what you are today rest of the Internet.

    1. fredwilson

      The first threat never came from Twitter. They played defense not offense

  9. John Best

    I don’t believe openness can’t be monetised, just that the method or route to monetisation has to be different.Closed businesses have a pretty clear relationship – the organisation to the consumer. The more openness you embrace, the more relationships are created, and the greater the number of groups (partners/consumers etc.) will be impacted any changes you make. Focusing on monetising one group may therefore negatively affect your ability to do the same with others.I think your Etsy example is spot on. They clearly focused on the community and opened up with a view to *improving* that relationship. Anything built on that openness had that built into its DNA, and was a positive reinforcer for it.

  10. William Mougayar

    Open doesn’t mean anarchy. Openness, like democracy can thrive when it’s orderly. The issue with Twitter is they didn’t go through any real effort to develop 1:1 relationships to better understand what their developers were doing, wanted to do, or what value-added they were providing. They could have partnered with dozens of developers more tightly and expanded the value to a lot more users. There was no relationship except via the API. That gave them a lot of blind spots and bad signals. Now they have to pull back as a knee-jerk reaction and throwing babies with the bath water. Twitter is a study in how Not to manage an API and Developers Relations. 

  11. falicon

    Open, in this case, is about communication. Profit is about adding value. I don’t think these two need to conflict at all.The trouble comes when there is not enough confidence or belief in the value that is being added to earn the profit that is desired…this causes a tendency to limit the communication (or at the very least be vague with it) and give the appearance of a less ‘open’ system.

  12. kidmercury

    i challenge any of the the proponents of “open” to define the doesn’t make money, closed doesn’t make money. good governance makes money. good governance understands its mission, its values, and communicates them in all that it does. usually, good governance is a combination of open and closed — meaning it allows some degree of extension/customization (open) while disallowing others (closed). these decisions need to be based on the mission and far as i know, twitter did not have a mission statement for much of its high growth phase. now it has a mission statement that to me the company does not really take seriously. it is hard to slap on a mission statement after your growing, it really needs to be built into the spirit of the company from day one. some say this may hinder the ability of a company to pivot and iterate; i say so be it.

    1. falicon

      I agree with most of this…the only part I have issue with is the “a mission statement that to me the company does not really take seriously”…I think they do buy into it 100% and I think that’s why they are willing to go through all the current pains.The other bit I would add is that I think the core leadership changes throughout Twitter’s life is very telling of it’s dual personality…in the early growth days, the people in charge stood for an approach that is completely different than the approach the people in charge now stand for. Neither is nec. better or worse than the other…they are just completely different.Change brings pain, fear, and complaints…and the bigger the change, and the bigger the emotional tie to the thing being changed, the larger the volume is on all these things…

      1. kidmercury

        to me it seems like a lot of these API restrictions are hindering the mission of becoming an information protocol — but i i suppose it depends how you look at it and an argument could be made that these restrictions serve the mission. i def agree management changes can hurt, or at least cause some turbulence. i also think huge valuations can put great pressure to monetize, and that this pressure may conflict with having a healthy value created/captured ratio. i a very lightweight app like twitter is capturing more value than it is creating — or at least i think this is what the developer community is implicitly saying when the lash out at twitter for closing things off. personally, if it’s too lightweight, i won’t build on it.

      2. fredwilson


    2. Chris Phenner

      Totally disagree. Read the post titled ‘Enduring Value,’ one of Dick Costolo’s first. I have referenced it dozens of times in conversation as the defining post that I go back to — it is the Twitter platform’s mission statement. It is ‘good governance’ and it makes clear what Twitter owns, and where it encourages third-party devs to add value.

      1. kidmercury

        when twitter first launched, it was supposed to be a tool to follow your friends. then it became this information broadcasting tool. i do agree that twitter defined its mission statement — but it seems to me this was done after the company was reasonably grown. as i’m sure you know costolo came on as CEO later in the game. by that time, a vibrant developer ecosystem was already in place.

    3. fredwilson

      Great points. You and my partner Brad are thinking very similarly about governance

  13. Frank

    What about buglabs? Are they profitable?

    1. fredwilson

      Getting there, possibly are there, but on a different roadmap than what we funded

  14. Bruce Warila

    When ‘openness’ starts to conflict with transparency, attention requirements, and democratic access then “open” is in conflict with value creation; that’s when you need to restrict the pipe.

  15. Chris Phenner

    I’ve worked the last 18 months on a part-time basis across a half-dozen ad tech firms. None of them would exist were it not for the OPEN nature of the online inventory their platforms leverage. A majority of my time has toiled at the service of the ‘Facebook Ads API,’ which follows the 10-year-old history lesson offered by Google’s Search API, through which billions and billions of dollars flow every year.Put another way: If you want to buy Google, Bing or FB media at scale, you HAVE TO work through a third-party API platform — these firms’ self-service tools offer neither the sophistication or ability to scale across inventory sources that a third-party platform can (see: Adobe buying Efficient Frontier for ~$400mm).I read in Fred’s open the issue framed as ‘open does not conflict’ [with making money], and if I were to re-frame the debate, I would say you are HIGH AS A KITE if your platform is not open as early as possible to let others sell on your behalf.FB snagged some of the folks who built the Google Search API, so they were smart and fast. Twitter and LinkedIn (a much more mature firm) still struggle by comparison.AVC has written previously about ‘API First’ product design (fist-thump-on-chest in agreement), but there’s a more powerful mechanism when it comes to revenue generation that might be called ARPAPIC (average revenue per API call) — how fast that number scales may be among the more leading indicators to scale.

    1. fredwilson

      ArpapicI like it

      1. andyswan

        me too it’s great

    2. Guest

      awesome. winning argument of the day.

    3. JamesHRH

      Chris – ads suck but your argument does not. Nice.

      1. Max Yoder

        🙂 this made me laugh.

  16. Matt A. Myers

    “I also think it is better to open up slowly, cautiously, and carefully rather than start out wide open and then close up every time an existential threat appears on the horizon”Like every relationship you’ll ever encounter in life.”Contrast that with Twitter which started out completely open which allowed anyone to build a third party client, grab a huge percentage of Twitter users, and then threaten to take them away from Twitter. That’s not a sustainable relationship between your product/service and the rest of the Internet.”I disagree. Twitter offered a 50% affiliate program for ads inserted into streams. Twitter getting the other 50% was apart of the contract. That offering was pre-selling getting developers building for the ecosystem. That decision was either made early on and deemed an acceptable costThis is the same idea with franchises versus chain-owned businesses. Starbucks locations are all chain-owned (most), however they could have gone the franchise way, however this would have leaked some of the profits to the franchise holders.Twitter offered franchise opportunities and now they’re killing off the franchises. That doesn’t sit well with developers who essentially were lured into a promise that’s now being broken.I wonder if true sustainability is in question, whether that 50% affiliate split really makes costs unsustainable, or if they’re merely setting up a controlled ecosystem instead of a managed one in order to maximize short-term profits (which can’t be maintained in a natural-managed ecosystem called the internet).So yes, I agree with you that you should open up slowly.

    1. fredwilson

      it isn’t about the rev split. its about the existential threat i mentioned in the post

      1. Matt A. Myers

        Okay, I can see too how that would happen.

  17. Carl Rahn Griffith

    You Reap What You Sow.Facebook IPO, QED.

    1. Cam MacRae

      Perhaps a little hasty asserting demonstrandum, Carl: There was plenty of reaping that which was sown by others.

      1. Carl Rahn Griffith

        Maybe, but…All involved are/were culpable, I’d tender.

        1. Cam MacRae

          Not quite all — some are guilty only of gross stupidity.

          1. Cam MacRae

            Ha! Love a bit of Mad Max!

          2. Carl Rahn Griffith

            He does a great job. Love him/the show!Has anyone ever seen Kid Mercury and Max in the same room, at the same time? Or Stacy, maybe? 😉

          3. Cam MacRae

            Lol!Did you happen to see this Steve Keen interview? I’m a big fan of Steve, not least because he was one of a dozen or so economists to predict the financial crisis.

          4. Carl Rahn Griffith

            Not that I recall, Cam – thank you, will check it out!

          5. kidmercury

            steve keen has some great insight.

          6. Cam MacRae

            He does, and despite Krugman’s best efforts he hasn’t been burned at the stake. Yet.

  18. Dave W Baldwin

    Interesting debate happening.Devs, Twitter is what it is today and it will be somewhat different next year, then different the year after or bust. We are in an open world of communication that doesn’t depend on Twitter, so think of what “that damn thing” is that Twitter suffers lack of and cure it.Or, cure it and make it independent. Then the decisions regarding marketing and creating a new platform comes about. There you can have that “open, we won’t screw anyone (…unless he/she is)”… social graph that is disruptive.A matter of know your audience and the breakdown where the members are on the evolution timeline.

  19. pointsnfigures

    Sort of like raising kids. You control just about everything in their lives as they grow. Once they get old enough, you open up more freedom for them. Eventually, they are just free. Give them too much freedom early and they get into trouble.

    1. fredwilson

      yeah. parenting has taught me a lot about life and business

      1. JLM

        .A parent never, ever, ever stops learning.The cycle of life — child, adolescent, young adult, adult, parent, middle age, empty nest, old age, one foot on the banana peel waiting for the grave — is just like the long term business cycle if you add in, for the business, rejuvenation, reincarnation, obsolescence (sometimes)..

      2. Pete Griffiths

        Like – you are always behind the curve 🙂

        1. pointsnfigures

          Except with bread you can start over!

  20. Michael Elling

    The big money is made when arbitraging an existing system/process and expanding it. Early on it was done in telecoms/voice. MSFT did it in computing. Google did it with content distribution. Amazon did it with books. Apple did it with music distribution and then mobile software/apps. What ecosystem is twitter disrupting and making bigger? That’s the bigger question here; not whether they are open or not. Google and Apple have disrupted both the carriers and vendors in the mobile space, with one being considered open and the other considered closed.

    1. Cam MacRae

      Media.Subtly at times. Other times not so much.

  21. Tom Labus

    Cash is king.It makes people/companies move in strange ways sometimes.Maybe things will evolve to the point where revenue/profits can be discussed from day one.

  22. jason wright

    Monday’s MBA post hints at company behavior. The early days are about survival.

    1. Carl Rahn Griffith

      With too many people swamped by the needs of a shallow ego and too busy scaling Maslow’s pyramid, we forget we are mere animals…

  23. JamesHRH

    This is SUCH a subtle concept. Marketplaces are the easiest ‘create more than you take’ model to grok.If you look at predecessor networks (lots of stuff on VISA) there was huge resistance to opening up customer bases to competitors.Careful design of how you interact with the rest of the internet = co-opetition. As usual, you have nailed the key nugget.As an aside, its no wonder tech founders are not lawyers……no one would scrape sites to create search nor would they store huge amounts of personal info in order to create an online yearbook…way too much “exposure”.In the end, open is not really open, just more open the most closed models……MS source code not open, PageRank algo not open, FB back end……

    1. falicon

      I’m with you here all the way.

  24. Carl Rahn Griffith

    Open is (of course) more than an API stance, etc – in fact that’s almost incidental – a culture and modus operandi of being open is far more important – and all too lacking, regrettably.

  25. Pravin J

    Compare this post with your last week’s post about Networks and Enterprise, MongoDB a open platform, still open, monetized when its enterprise users started asking for support and infrastructure scaling solutions. Same was the story with another startup – Gluster, now acquired by RedHat.I guess there was an opportunity for Twitter by ‘staying open’ and ‘making money’. There was a time when brands/enterprises were asking solutions for – how to use twitter for brands? how to manage social crm? how to measure online reputation? how to get more engagement? and so on. Brands/Enterprises were willing to pay for it, and they paid too. But not to Twitter, to many social media agencies / products / tools. Twitter ecosystem is highly valuable, there was opportunity to monetize – which was (unfortunately for twitter) captured by other players who shipped faster on top of its API. Twitter could have played a big role over here.On similar lines, there are multiple advertisers who choose doing online marketing on Google Adwords through multiple tools like (powered through Adwords API). If Twitter had release similar tools that were built by developers, they might have just co-existed with others tools/applications available in the market.

  26. Emily Merkle

    A philosophy of openness is one I believe in intrinsically. ARPAPIC is a true and valuable measure. One must also consider that fact that each API call is a drag on your system that contributes to latency.

  27. iamronen

    a more pertinent question on this blog would be “does open conflict with making enough money to create VC levels of returns”I believe it’s one thing to create an open ecosystem that is, for arguments sake, a non-profit vs an ecosystem that can attract venture capital … of this I can’t think of any examples … my gut tells me it isn’t possible (systemically)

  28. kevinmarks

    Isn’t the success of WordPress a counterexample to your assertion that you can’t build a sustainable business on open?

  29. Scott Barnett

    This argument isn’t so much about open vs. closed, but rather the comment of whether you are “adding” or “subtracting” features. In Twitter’s case, they started completely open, and by slowly removing some of those capabilities, you are removing features people use and enjoy. I put Netflix in the same boat – they came out with an awesome product at a ridiculously good price… they drove out the competition, then raised prices. Same product, but now 60% more expensive. You’re taking away the reason I tried you in the first place – a great service at a competitive price. Once you drive out the competition doesn’t mean you get to raise prices.At the same time, I find Apple, Google and Amazon are getting more and more closed – keeping their content and access to it “locked in” through their devices. I do think it sucks that I have to have a Fire for Amazon specific content (like Prime Instant Video and Lenders Library) that I can’t access from the Kindle App on my Droid Tablet. I also read that I won’t have access to Google Maps on the new Fire – I’ll have to use Nokia’s Mapping technology. This isn’t progress.

    1. leigh

      adding or subtracting value vs. feature maybe 🙂

  30. gregorylent

    oh twitter, weird is just in your dna from birth …a cosmic service should not try to fit into mba-consciousness

  31. Steven Kane

    “Create more value than you capture”? You mean, as my Dad used to say — “Having a successful business is easy. Just bring in more money than you spend.”

  32. Pete Griffiths

    The degree to which you can present an open API to third parties is a function of the maturity of the business.An API is not to be taken lightly – it is ‘forever.’ In some cases the API may be modelled on an existing API and the follower can thereby benefit from the pain of the originator.In other cases there is no obvious model. In such cases it is VERY dangerous to prematurely publish an API to which you will subsequently be held hostage.Vic made exactly this point wrt Google+ pretty recently.

  33. howardlindzon

    Sure would be nice if Twitter would just say that. I believe you btw. Thats just cool and how I have always felt as we slowly open our api…… . I am not sure I would ever believe twitter the company at this point. You the man.

  34. howardlindzon

    It’s the Bank of the Internet…which is interesting since the actual Bank of the Internet $BOFI is a non TARP bank that is at all-time highs today…but i digress …You have to treat the web like a bank. The more you put in the more you get out. You can’t just show up (actually you can) and take stuff, the more you share and give, the more you get …LONG-TERM.

    1. leigh

      lol… bank more you put in the more you get out. which bank are you talking about?

  35. leigh

    my belief in open isn’t a business strategy it’s a way of living. It is so antithetical to the way current business practices work, that some days (maybe even today) it makes me want to sell everything, get the f*ck out, and become a hunting and fishing in Northern Ontario (and I am not a very good shot).if closed is the only way to make money, there is something so much more fundamental wrong with the system that we should all be a bit worried.

  36. Robert Holtz

    You’ve got it right Fred. Not only can you make money AND be open at the same time, you can actually make MORE money by being open.The key is to understand — early on — what the “secret sauce” is of your offering so that piece is always essential and core… to make sure YOU are the purveyor of that key piece. It takes imagination and creativity to understand which aspects to expose in an API layer and which to leave closed.Really think about it too because sometimes the part that seems obvious to keep closed is exactly what you should open up. A perfect example is curation. At first blush, curation is something to keep closed. But curation is one of the most expansive aspects to syndicate. In many offerings, opening up curation tools is key to growth not just vertically but horizontally. “Know thyself” and know which part is quintessential to your offering such that only you should control it and which parts should be part of the larger graph that is the “solar system” of your users.The best piece of advice you offer here is to roll out the “openness” in phases. First off, it is easier to do but it is also easier to manage. Users, customers, and partners will ALWAYS appreciate it when you add features, capabilities, and connections. They will also always retaliate when you take them away. So instead of starting with a wide open system and taking things away as they become “inconvenient”, do the opposite.Here’s the key point from my perspective: An API is more of a business tool than a technology tool. It is a method for strategic partnership at the meta scale of the Internet. So be careful about what that API exposes and be selective about who gets to use it. Because an API is like an automated strategic alliance. No company or individual ever makes it in this life as an island. APIs and by extension, “being open” is key to long term success and longevity.But know your own secret sauce and roll out the trust in baby steps. Just as in friendship, it should be always growing. When someone pulls back, it is usually the beginning of the end… so be methodical about what your API exposes.To borrow from George Washington, being open should evolve in the same way as true friendship; as “a plant of slow grow that must undergo and withstand the shocks of adversity, before it is entitled to the appellation.”

    1. fredwilson

      exactly. you said it better than i did. thanks!

      1. Robert Holtz

        You rock, Fred! Nice of you to say.My most recent comments have been especially long for some reason… I’ll try to curtail that.

        1. fredwilson

          No need

  37. LissIsMore

    Love the O’Reilly Doctrine. First time I have seen it. Seems to have relevance beyond just a product context. This could also be seen as a personal success doctrine.

  38. Joel Natividad

    Twitter is now a utility. Imagine if the Internet went the same way Twitter is going now, we’ll still be in Compuserve, AOL, Prodigy land. Or if the Interstate Highway System was instead owned by a hodgepodge of private companies.Perhaps, Twitter should make it a public resource and extract value by being the prime guardian/contractor maintaining it for the public good. I believe there’s plenty of value to be captured to make Twitter a very successful company. Maybe, they can even convert to a B-Corp.

  39. Andrew K Kirk

    Open (free) means that instead of exchanging money for services, we exchange our information to advertisers, who in turn pay the service.The millions of users don’t have a problem with this concept, either because they aren’t opposed to the transaction or they simply do not even weigh the consequences. Increasingly platform services providers (ex. are challenging this notion. Time will tell the results.Economists acknowledge that humas are terrible at judging value. Would be interesting discussion of how does one decide the “cost” of our personal information versus the value provided by a service.

  40. ShanaC

    They’re a great example – where the service comes from the network, not the technology itself, which is open.Twitter should federate some of their code and close off parts of their service, which is sort of what is happening now.

  41. Alan Mendelevich

    The BIG difference is that GitHub is for Git, what [pick your favorite client] is for Twitter. So you should actually compare Twitter to Git, not to GitHub.

  42. Guest

    love github.

  43. Matt A. Myers

    There is an important difference as to why Github is so loved and successful, and that is because the majority of the users are paying for the service – and that’s because the majority of the people using it are using it for businesses and make money with it.

  44. andyswan

    I think twitter simply decided that it doesn’t give a shit about the developer community… it cares about its clients (advertisers) and its product (users). The 3rd party devs were capturing more value than they created…EDIT: Should say “doesn’t give a shit about the leaches in the developer community”

  45. falicon

    I think the problem with Twitter was that it was a simple experiment that caught fire to the likes way beyond anyone could have predicted…and it happened so fast that there was never really any time (or effort) put into planning how to control and sustain the fire over time…Now the whole forrest is burning, and it’s heading for the big city…and so drastic measures are being taken in an attempt to save the city from certain devistation…

  46. William Mougayar

    That’s a good point Charlie. The issue is that Twitter didn’t go through any effort to develop 1:1 relationships to better understand what their developers were doing, wanted to do, or how value-added they were. They could have partnered with dozens of developers more tightly and expanded the value to a lot more users. There was no relationship except via the API. That gave them a lot of blind spots and bad signals.

  47. markslater

    absolutely charlie. The last 5 years have seen an entire class of companies dupe the user. Here is a piece of candy – come on in – i’ll hook you and then sell you to the highest bidder.Thats like taking a shiny new toy – and overlaying an attention driven business model on top that was created over 50 years ago. Lame.

  48. kidmercury

    i don’t think it’s prudent to build on super lightweight apps masquerading as robust platforms — they will not be able to manage a platform that way. facebook and amazon have a more robust approach that i believe will end up being more developer friendly.

  49. fredwilson

    No question

  50. laurie kalmanson

    reminiscent of the screaming in olden days when ad-free sites started having adsads from the beginning: ok, fine; or not fine but it’s baked inads bolted on later: hey, what are these ads doing here?



  52. Julien

    Twitter is not a protocol. The problem in the case of Twitter is that we actually *miss* that protocol. Twitter purposedly (?) keeps the confusion so that people think that a social experience (twitter like) is only possible on twitter.

  53. Julien

    Agreed. And yes, I’d pay for some premium features on Twitter, like the ability to get back to my old tweets, a better search, the ability to share accounts. I pay Github for some of these features already!

  54. Alan Mendelevich

    Well, one may argue that it became popular because it acted like a “protocol”. None of the users that made twitter what it is today used Twitter’s website in the process.

  55. falicon

    “devs were capturing more value than they created” …very good point.The ones that had the opposite approach were simply acquired and folded into the internal mix.

  56. LIAD

    sure the create/capture quantity changed over time but for the first few years…can anyone say twitter would be where they are today without having had the dev community build on it with gusto during its nascent years?

  57. brian trautschold

    I think you are correct that basically twitter *no longer* cares about the dev community. In the beginning, they desperately needed the 3rd party that apps drove millions to the site, build platform apps, tried to control the signal-to-noise, & built business value into the ecosystem…later, as the value shifted from the network to the 3rd party dev’s – twitter used their api restrictions to bully the apps/ services they wanted (think: tweetdeck)…and now we are likely at the final chapter, where they believe they are big enough, wealthy enough, and talented enough to develop more value in house.

  58. fredwilson

    They violated the O’Reily Doctrine

  59. Andrew Hoydich

    It was the early group of 3rd party devs (who were the first group of super-users) who made twitter what it is today. The hashtag, @replies, re-tweeting, the term “tweet”, and many more iconic aspects of Twitter were created by the people Twitter is now ‘not giving a shit about’Fast forward to today, there are obviously people out there hunting for an easy buck by capturing value instead of creating it but…At this point, it is actually Twitter that is capturing more value than it’s creating.This will be true unless Twitter can replicate the amount of creativity, passion, and work that the good-intentioned portion of the 3rd party community offered.

  60. andyswan

    doesn’t matter. They don’t “owe” anybody anything. If you helped build twitter and didn’t get paid for it that’s pretty much your fault.

  61. JimHirshfield

    @ccrystle:disqus @andyswan:disqus @liad:disqus Let’s not forget that Twitter did acquire some of these early devs (in search and front-end client). So, free markets, open platform, and not only learn from the 3rd party devs, but reward the best by acquiring them.Yeah, Twitter’s left some flotsam in its wake, but devs who build indefensible product that’s 100% dependent on one platform have got to know they’re taking a risk.Anyway, my point is, market did reward some developers on the Twitter platform.

  62. LIAD

    for sure. we’re not in play-school, everyone gets the rules of the game. i just think they could have handled the transition with a little more finesse.

  63. kidmercury

    true, but if people feel like they got burned or deceived — whether these feelings are justified or not — there is going to be negative PR and difficulty in securing allies in the future.

  64. LE

    I’m reminded of stars who accept their oscars and thank their teachers who got them into acting. Never heard any story though about anything tangible they did for them other than offer thanks.On the flip side I’m sure many businesses have had situations where they’ve gone the extra mile for customers and helped them out of jams and saved their ass only to have the customer jump to a competitor if the price of the product is cheaper or if the person they have the relationship with leaves the company. That’s the way things operate. Generally.

  65. William Mougayar

    Exactly. They never reached out to us. The only call I recently received from Twitter was to sell me on buying Sponsored Tweets. When I first opened the email, I thought we were being approached for a partnership, then that hope went away after 5 seconds of reading. As a developer, I fear Twitter.

  66. fredwilson

    But they are companies not scrums

  67. kidmercury

    i think there is a lot of truth to your point here. that is why i really respect google+ for being very slow with their API development, even though some developers are crying about it. a more thoughtful, deliberate process will really help avoid conflict down the road, IMHO.

  68. fredwilson

    I don’t know about the second paragraph but if I was writing a book on Twitter (I won’t) it would start with that first paragraph. Birth is destiny.

  69. fredwilson

    But it allowed a team of between ten and twenty to focus all of its time and energy on keeping the service up. Mistakes were certainly made but they did have the right priorities

  70. fredwilson

    That’s not right. They care a ton about the dev community and there is only one box in the quadrant they published on their blog where they want to build the product in its entirety

  71. andyswan

    Ya I definitely over-simplified that above. Actually have a lot of respect for twitter and the way they are managing this big but necessary transition.

  72. brian trautschold

    point taken @fredwilson:disqus… (overstated they don’t care about the entire dev comm)… the ‘safety’ of the quadrants remain to be seen…I do appreciate you taking the time to answer so many comments on this hot topic.

  73. LE

    “They care a ton about the dev community”I get the distinct impression (especially after reading @ccrystle:disqus comments) that by the way they operate they aren’t in tune to what is expected in the developer community because it’s not in their management makeup (which flows to the people they hire). It’s not seat of the pants for them. That seems reallyy obvious to me from my snap judgement. I am pretty much single focused in one direction vs. the opinions of many on this blog. As a result I would literally have to have people of different viewpoints (like Charlie) to enlighten me to why my thinking might need to be changed. That’s one of the things that I get from reading this blog btw. A perspective that I’ve really never paid attention to before.

  74. youflavio

    The adage goes: “Watch What They Do, Not What They Say.” Anyway, it’s a private company, they can rule over their strategy as they see fit.

  75. fredwilson

    You shouldn’t. You read too much into things. They have no aims on your business

  76. William Mougayar

    There is no doubt that these were the right priorities at the time 100% and even beyond the team of ten or twenty. I was probably referring to when they started to reach 100-200 employees.

  77. William Mougayar

    I agree, but I’d love to have been contacted by their dev relations group. We have an emerging API and we’re in lock-step with the 2-3 developers that want to do stuff with it. We know exactly where our value or theirs starts and ends, and where it’s going.



  79. Guest

    absolutely. there are other ways to get there now, though. There weren’t then–not cheaply anyway.

  80. kidmercury

    agreed fb != amzn, but i think both can succeed as platforms because they are not lightweight apps — in other words, they are creating sufficient value where i don’t think developers will resent them for plugging all the holes and then not getting credit. personally i don’t do much to build atop fb and don’t plan to, although i’m happy to build atop amazon.

  81. Matt A. Myers


  82. fredwilson

    this post lays out pretty clearly what they are going to do and what they are not going to do

  83. Cam MacRae

    They’ve done a terrible job of communicating. Truly horrible.Plus they seem unaware that in dudding (perceived or not) the maker of my client of choice, they’re also dudding me, their esteemed product.In the space of a month I’ve gone from advocate to openly hostile. Not very well played. And it’s all down to words on a page.

  84. Guest

    that would be great, though I’m guessing some other countries are already beyond b-corp, inherently.

  85. fredwilson

    they could do a better job with outreach for sure. but there are a ton of developers working on their API. tens of thousands i believe.

  86. fredwilson

    has any company ever done that in the history of the tech business?

  87. fredwilson

    i will let them know. maybe they might even read this thread.

  88. Abdallah Al-Hakim

    good points Charlie but perhaps it all goes back to Fred Wilson blog in the past where he said ‘don’t be anyone’s bitch’ – Personally, If I was a developer (which I am not 🙂 I would want to not depend on one particular platform for my service or product

  89. LE

    “And even if they say they’ll stay out of those quadrants, do they contractually commit to it?”Companies that made tech clones had contractual commitments from Apple of a fixed time period. Then things changed and those commitments expired. The developer is the one with something to lose here. Consequently a commitment of a fixed short time period (and it would be short) is of nominal value. If they commit to it for a year perhaps 3 how much value is that?

  90. William Mougayar

    Did you read @anildash rendition of the Twitter announcement? It’s brilliant and exactly how they should have communicate the changes

  91. jason wright

    “Birth is destiny” – caught my eye.Not quite sure what it means though.

  92. hypermark

    Along these lines, a prophetic truth that has played out over and over again is, “If you want to see how it ends, look at how it begins.”That’s especially true of engagements with people. What you see is, generally speaking, what you will get.



  94. Abdallah Al-Hakim

    I must agree with Fred that the post he linked does lay out Twitter strategy. Many might not like it and it certainly will hurt some but it is tough to claim ignorance after it was posted

  95. LE

    @ccrystle:disqus @fredwilson:disqus”pretty clearly what they are going to do and what they are not going to do”Except also contains like any good legal agreement, a catchall:”Finally, there may also be additional changes to the Rules of the Road to reflect the functional changes in version 1.1 of the Twitter API that we’ve outlined here.”I don’t have a horse in this but over time I’ve learned that people and companies do what they have to do in the end despite overriding principles. So if you can’t live with that fact you need to buy a toaster.

  96. Pete Griffiths

    I have been extremely impressed with Costolo. Not least because he is an exceptionally talented communicator.

  97. Todd

    I am not a Microsoft hater, made quite a bit of money off the platform but they are no different in this than anyone else.They realized they were building a multi-sided market that required users and applications, so they treated developers well, but that didn’t stop them from competing with those same 3rd parties if the market was lucrative enough, and not all of the competition was considered fair or open.I guess we can debate the difference between heavy and light handed approaches to this, but it’s almost become a rule that once Microsoft targets your space (on their platform) your done.Twitter will most likely do the same regardless of their stated intentions at this point in time, if something becomes too successful in any area they will compete with them, and honestly or not they will have a distinct advantage when doing so.

  98. LE

    ” much as Microsoft did”Microsoft made plenty of money and was able to spread around the cheer. Developers and techies were an asset and they depended on them like service stations depended on car manufacturers to make cars that needed service and didn’t come with 5 year bumper to bumper warranties (that all changed of course as the manufacturers business model changed.).

  99. Abdallah Al-Hakim

    I really like the simplicity of O’Reily doctrine. I am thinking of how it relates to curation tools – It is a great doctrine to keep in mind

  100. raycote

    With a public-road-system do youCreate more value than you capture?Maybe for truly fundamental social exchange systems the you and the value capture must be by design constructed as a collective-value platform ???EDIT:Maybe that is where the approach comes in ?

  101. Abdallah Al-Hakim

    completely agree about the ‘indefensible product’ point

  102. LE

    “‘don’t be anyone’s bitch'””I would want to not depend on one particular platform for my service or product”I think it’s fine to be someone’s bitch as long as you can manage the downside risk or use it as a stepping stone to something better.What comes to mind is in traditional business having the classic situation of a single customer taking up a large percentage of your business (happens all the time). There are cases where companies lose that business and go bankrupt (happened to “rich guy” in my neighborhood growing up who bought his kid a brand new Firebird at age 16 which was a big deal back then). There are cases where people use that big customer and build their business further to where that doesn’t happen (my first company). It’s a risk that needs to be evaluated relative to the alternatives.Part of the problem with reading online things is it is general in nature and doesn’t take into account the specifics of a situation. You learn by doing and observing over time. Reading what others have done, while helpful, can only get you so far.

  103. LE

    You’d have to take the time to make a compelling argument to them as far as why it would be good for them. “historic, bold move” probably isn’t enough of a motivator.

  104. Pete Griffiths

    It would be insane.

  105. LE

    “difficulty in securing allies in the future”Givers always come back for more abuse. Takers always have a new sweet smile and are forgiven. (Think of the guy who beats his wife promising never to do it again.)

  106. andyswan

    I understand that but the “early group” certainly benefitted as well and the transaction was clear.

  107. Andrew Hoydich

    Very true, very true

  108. Donna Brewington White

    But does this take into account the transformation that can happen over time — especially factoring in the learning that comes with experience?Or are you referring to something more essential…like character, personality…which for a company, of course, would be that of its leaders?

  109. Donna Brewington White

    I’ve noticed that google+ seems to be your platform of choice. Is that correct? What draws you?

  110. hypermark

    @donnawhite:disqus while people obviously can change, learn and evolve, what I am referring to is the dynamic where dealing with a person who, for example, was a pain in the ass the first time that you met them. Or, any time there was a fuzzy area, it was a moment of conflict.My point is that we delude ourselves into thinking that once we are down the road with this person, things will be different. Usually they aren’t.Conversely, folks that are easy to deal with, and do what they see in the initial go around, will generally be that way throughout.It’s more of an assertion to PAY ATTENTION to first impressions. It’s a simple truth that many of us ignore to our peril.

  111. falicon

    amen. +100.

  112. Donna Brewington White

    When I see ads where there previously were none, I generally sigh with relief that someone is now paying to sustain this service that I enjoy. I used to joke about laying awake at night wondering how Twitter was going to monetize since I was becoming so dependent upon it. I was only partly joking.While I recognize that there is a difference between relationships with users v. developers, in the back of my mind, I can’t help thinking that the way a company treats developers is indicative of how it might treat users down the road.

  113. Donna Brewington White

    Point well taken.

  114. kidmercury

    mainly that google+ will drive search results significantly, and thus is of great interest to me as a marketer. search and youtube remain my favorite sources of traffic for internet marketing. but, i also think google hangouts could be huge, and i like the product very much. i also think google is really committed to google+, and if they really make a it a priority, i think they will blow the offspring of bubble 2.0 — i.e. the big social media players — completely away.

  115. laurie kalmanson

    that’s a fresh take on it.there’s also paid vs. ad supported and/or data farmed. more and more, i’d rather pay.

  116. Donna Brewington White

    Thanks, Kid. In the back of my mind I’ve always anticipated that I’d someday spend more time there — especially if I began to take marketing more seriously.

  117. Abdallah Al-Hakim

    I am slowly warming up to Google+ – I think as Google integrates it more with their search data it will become a really powerful platform. I am also finding that engagement part in Google+ is more enjoyable than that of twitter. I will not stop using twitter but Google+ does offer some cool features such as circles and hangouts

  118. Pete Griffiths

    IMHO there is no way that in an environment as fast changing as ours that a responsible CEO would lock up his strategic options like that.

  119. Pete Griffiths

    I think there is a HUGE difference between Twitter and Microsoft.MS had a mature business model for which there was longstanding precedent. In such a case the boundaries between the core value of the wintel platform and the value add of developers was extremely clear, with a few boundary cases such as Norton system utilities.Twitter, by way of contrast, had no such clear business model with clear demarcation and IMHO the kind of hedging and fudging we have seen about even pretty fundamental issues wrt who can do what, was pretty inevitable.

  120. Pete Griffiths


  121. Pete Griffiths

    The problem is not whether he had such a business model, but rather the degree of confidence he can have that it is a sustainable business model. When Wintel was dominating the world as a platform with huge scale it was evident that the business model was sustainable for the foreseeable future (not now). In such circumstances it is to your advantage to set out clear lines of demarcation because you want to attract as much value as possible to your platform and because you understand very well what the limits of the platform are, you can be very clear.But today there are huge companies with gigantic scale (Twitter Facebook) where their ‘ultimate’ business model is not yet obvious or fixed. In such cases it is extremely risky for the CEO to tie his hands. Take a simple example: if FB announced that it was not in the payments business and encouraged third parties to enter that space on their platform then realized that it was in fact one of their biggest potential money earners but had contractually committed to stay out of the space, even though it was now obvious this was an extremely natural fit, the CEO would rightly be fired. Right now Costolo is steering Twitter in a very specific direction, but he can’t be absolutely sure he’s right. He may still have to pivot. 🙂

  122. Pete Griffiths

    Indeed. But of course the App Store is another example of a well understood mature business model. 🙂

  123. Mark Essel

    Hangouts are critical to my workflow now

  124. fredwilson

    yes, i have 20/20 vision in the rear view mirror

  125. fredwilson

    i would say companies only change courses when they have management changes at the top