Twitter as Kingmaker

The difference between doom and cash-out is quite slim in the platform world. Take a look at TweetDeck. The popular Twitter client is reportedly mulling a $50 million acquisition offer from Twitter itself, which would not only make its backers Ron Conway, John Borthwick and others happy. It would also make TweetDeck the official Twitter client.

Rewind to March. TweetDeck was mulling a much smaller acquisition offer from Ubermedia. Twitter cut off access to UberMedia Twitter clients for, among other things, violating the Twitter copyright. The lesson: if you’re building a business on a platform, make sure you either steer clear of features that platform considers “core” or be so good at them that you get a fat buyout offer to become a piece of the platform.

Assuming the deal goes through, it would stand to reason TweetDeck would become the default client for Twitter. That will leave other leading clients like Seesmic, Hootsuite and others in a delicate position of depending on Twitter’s fire hose in order to compete with a Twitter product. That’s not a good proposition.

Twitter has already warned off mobile clients. It allowed them to flourish when the service was having trouble even keeping its website going. But then, it began to see mobile as core to its product. It bought Tweetie a year ago. Then just recently it warned developers away from developing new clients. Third parties are at the whim of Twitter, since it can easily cut them off from the flood of real-time updates.

We’ve seen this time and again. Facebook has at times acted in its interest to the severe detriment of those building atop it. Just ask Slide and RockYou about that. It recently decided that social media celebrity endorsement network Ad.ly wasn’t in its best interests and shut it off from using the platform. Ad.ly CEO Arnie Gullov-Singh has told me the company has a great relationship with Twitter, which makes up the lion’s share of its business, but what happens if Twitter starts brokering its own celebrity deals? The hope, it would seem, is that Twitter would decide Ad.ly is better at it and should be brought on. But until then, Twitter is holding all the cards.

The key question, from Twitter’s view, is whether a company is adding to the “ecosystem” or not. It has blessed the efforts of some, such as SocialFlow, a startup that promises deep analytics to brands on when and how to update Twitter based on response rates. The startup recently raised $7 million.

The problem Twitter risks creating is developers won’t want to build on a platform that’s too unpredictable. Twitter clearly has a ways to go before it fully realizes its potential as a business. It stands to reason that as it hashes out its business model it will find third parties in the way that will get brushed aside. That’s the risk of playing in someone else’s sandbox. A variation on Twitter investor Fred Wilson’s advice on Google applies: “Don’t be a Twitter bitch.”