Jeroen Bouwens

Ramblings about software engineering, technology, business and everything else

You Are Not the Customer

There is currently much ado about the changes to Twitter’s API TOS. The short of it is that they are essentially killing off any competition to their own client apps by restricting the number of users that can use a specific app. This is leading many to huff and puff about how this is harmful to users, reducing choice and stifling innovation.

While all this is probably true, it may also be largely irrelevant. With situations such as these I am always reminded of a quote I heard quite some time ago (although I forget who said it):

If something is offered to you for free, always assume your are not the customer, but the product.

You are valuable, because you have money to spend. Data about you is valuable, because it can be used to infer to some extent what you are likely to spend money on. Companies spend untold millions trying to reach the people most likely to buy their product, in order to convince them to go ahead and buy their product. If something is free, that probably means it gives interested parties yet another way to reach you, or some information that allows them to characterize you in some way.

Interestingly, “free” is the norm for the online tools people use daily: Twitter is free, Facebook is free, Google is free. Can you imagine having to pay google for the privilege of using their sophisticated software to search for that little nugget of information you need in a sea of billions of pages? The mere thought is preposterous! But somehow Google is also one of the most profitable and successful companies of our time. That’s because they make virtually all their money selling advertisements through the AdWords system, supposedly conceived by Scott Banister (who, incidentally, has therefore contributed more to the financial success of Google than Sergey Brin and Larry Page, even though the latter two have a net worth of around $20 billion each, while Banister’s net worth is too insignificant to be listed anywhere)

But here lies the crux: Google is selling advertisements. They are not selling search, email, docs, maps or any of the myriad applications Google offers. They sell ads. So the people placing advertisements are Google’s (And, by analogy, Twitter’s and Facebook’s) customers. An advertiser is most happy when as many people as possible see their message and (ideally) buy their product. So this is why, in the case of the Twitters, Googles and Facebooks of this world, the users are not the customer, but the product. Because what an advertiser is buying is eyeballs to look at a message, and information to decide which eyeballs should see the message.

This is also why it is futile to condemn Twitter for abandoning their users. Twitter doesn’t exist to give users the best experience possible, they exist to maximize profit, which is done by giving advertisers the best experience possible. While enhancing both users’ and advertisers’ experiences are partly overlapping goals, allowing 3rd party developers to release Twitter client apps for the entire user base essentially blocks a stream of revenue, since these apps can show ads for which Twitter does not receive a cut. From Twitter’s perspective, they are paying for the infrastructure used by another company (the 3rd party developer) to make money. Something the shareholders will not accept forever, as is now becoming apparent.

Of course, it could be argued that Twitter’s actions of late will eventually drive users away, which in turn will drive advertisers away, because fewer eyeballs. This is a valid argumenti, and may be Twitter’s downfall. Some say Twitter is pivoting, and remaking the Twitter platform into something used by the masses primarily for the consumption of professional content, as opposed to a social media platform. That would be pretty daring, at this advanced stage. They may not have a choice though. Twitter is very suitable for use on a mobile platform, so they will have the same problem Facebook faces trying to continue monetizing their enormous user base as it moves to mobile en masse, only more severely.

This may be Twitters attempt at finding a way out of that corner.

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