Why Twitter is becoming more like Facebook

It was a few months ago that I first realised something odd was going on in the world of Twitter.

The first clue was a blogpost from the company behind Echofon, the application I used to access Twitter on all of my devices. The reason I use Echofon, by the way, is quite simple: as far as I’m concerned it’s far better than the in-house app: it’s snappier, it offers more features, it’s more intuitive, more flexible, more convenient and less clunky than the official application.

So it was with some horror and a touch of disbelief that I read the abrupt statement from the company that makes Echofon, Naan Studios, saying it would be shutting down the desktop and Firefox versions of its app.

The second clue came when I started to look for an alternative client, which in my case was Twitbot – an extremely well-regarded client for the iPhone and iPad which had just released an application for the Mac. The problem was that it was selling the thing for a frankly astonishing £13.99.

How could any application be worth that much? The answer, it turns out, can be found on this rather wonkish but extremely important blogpost on Twitter’s developer site.

The short message is that in future Twitter is planning to place stringent limits on independent applications which, like Echofon and Twitbot, perform the same function as the company’s in-house Twitter client. Amongst other new rules, once an application has exceeded 100,000 users and then doubles its userbase (something which can happen pretty easily given the scale of the Twitter usership (500m and counting)) it “will not be able to add additional users without our permission.”

The blogpost added that it would “require” companies with more than a million users (which is quite a few of the existing clients, based on the numbers of downloads from the iTunes and Google Play stores) to “work with us directly”.

That helped explain why Echofon was mothballing its Mac app, and why Twitbot was charging so much for its app: it was uneconomical for either company to continue without a radical change of business plan. In Twitbot’s case, it was actually trying to minimise its userbase – something pretty unusual in the age of social media.

Anyway, why does all of this matter? Well, for one thing, it’s a worrying trend from the user’s perspective. Twitter is effectively sending the message that users no longer have much of a choice in how they want to read their tweets. That’s a problem for some of us, although according to this calculation from Benjamin Mayo we only account for about a quarter of all tweeters.

But there is a deeper issue here, reflecting an identity crisis that Twitter seems to be going through. When Twitter was set up, it liked to depict itself as an infrastructure – an “ecosystem”. It provided the network through which people would send and receive tweets. For most of its existence it didn’t even have its own software: you would either go to the Twitter website or you’d access it through Tweetdeck, Echofon or one of the other apps for your mobile and your computer.

This distinguished it from Facebook. For many, it was one of the service’s defining features. Whereas Facebook’s user experience was focused on its website, in Twitter’s case the website seemed almost like an afterthought. What came first was the service, connecting you to other people, regardless of which client you accessed it through.

The problem is that this isn’t as clearly lucrative as Facebook’s model. Whereas with Facebook it’s immediately clear to advertisers what kind of exposure they can buy through the Facebook site, the precise nature of how ads show up in Twitter clients has always been less uniform. Which (and this is my own presumption) must have posed a problem for Twitter when it came to work out how to monetise its enormous userbase.

It’s seems pretty clear, on the basis of Twitter’s own description of its new API policy (the technical term for how it grants outside access to its service) that it intends in future to become more like Facebook. From hereon, users will be pushed into accessing the service through its own website and apps, where the overall experience (for which, read: the prominence ads and featured tweets are given) can be more tightly-controlled.

So in the end it all comes down to money.

The same rationale helps explain the latest episode in the war between Facebook and Twitter – the stand-off about whether Instagram (owned by Facebook) can display its photos on Twitter. Photos – to be specific owning your photos – matter for both social networks, because analysing those photos can help provide marketers with more information about the specific products to target at people. So Twitter wants to discourage people from using Instagram, by making it less convenient for users to view those photos on Twitter, and point them instead towards its own photo service.

In some ways, Twitter is rather like many of our newspapers, which are desperately scrambling around for ways to restrict their content, having given it away for free online for so many years. Having experimented for much of its existence with giving app developers free and unfettered access, it is now erecting a walled garden around itself.

One can understand, on an economic basis, why the company is doing this. But as a Twitter user, whose experience will be undermined by all of the above, I have to profess to being rather disheartened. In economics, competition is supposed to enhance the product for the consumer – not make it worse.

The BIS and the economic bubble warning we cannot ignore

The Bank for International Settlements is an odd organisation. Originally set up in the 1930s to facilitate the payment of First World War reparations by Germany to France, Britain and others, it has since transformed into a club of central bankers.

What’s less well-known that it came within a whisker of being disbanded during the Second World War. It had been tainted by the failure of the reparations policy and by the presence of prominent Nazis on its board. At the Bretton Woods Conference in 1944, the Norwegians lobbied for it to be dissolved – after all, aside from anything else, what purpose did it have any longer? The British argued against this, but were overruled by the Americans* and the conference agreed that the BIS would be shut down.

But in the event, the undertaking was forgotten and the BIS survived. And, many economists would argue, a good thing too. For today, the BIS is renowned for being one of the only international institutions to have warned us of the risks and imbalances which eventually led to the great financial crisis of 2008.

Which is why we should take note, today, that it has issued yet another warning. According to the BIS’s latest Quarterly Review financial markets are starting to behave in some of the ways they behaved before the crash. In particular, investors seem to be chasing riskier and riskier assets, despite the fact that the economic prospects are hardly all that great.

Here’s the key passage from the BIS report:

some asset prices started to appear highly valued in historical terms relative to indicators of their riskiness. For example, global high-yield corporate bond spreads fell to levels comparable to those of late 2007, but with the default rate on these bonds running at around 3%, whereas it was closer to 1% in late 2007.

The same was true of investment grade corporate bond spreads, but with respective default rates of a little over 1% and around 0.5%. Indeed, numerous bond investors said that they felt less well compensated for risk than in the past, but that they had little alternative with rates on many bank deposits close to zero and the supply of other low-risk investments in decline.

Bond yields usually move in line with the wider economy’s growth prospects, but clearly these two lines have started to diverge in recent months. There is something going on.

At least past of the likely explanation – and this is my interpretation rather than the BIS’s – is that the flood of money being set loose by central banks, including the Bank of England and the Federal Reserve, through quantitative easing is pumping asset prices higher.

But either way, it is alarming that the very institution which first warned about the prospects of a crash is issuing a warning again about the same kind of behaviour happening in asset markets.

* After a confrontation about this with Henry Morgenthau, the US Treasury Secretary, John Maynard Keynes actually collapsed and had a heart attack. He was wrongly reported as dead in Europe shortly afterwards. Given that Keynes was arguing against the BIS being shut down, I suppose one could say that Keynes almost died trying to protect it.