Interesting piece in the Telegraph quoting new Twitter CEO Dick Costolo saying that Twitter doesn't have a long-term vision, but it's his job to come up with one, and we should expect to hear something there shortly.

I think what he did here was admirable because it's so obviously true. It invites people like yours truly to pontificate publicly on what we think their vision should be. Maybe someone somewhere has an idea, and cares enough to share it with the rest of us. Maybe there will be something worth listening to in all the noise?

So what do I think Twitter's vision should be?

It seems, no matter how you slice it, they have the same two choices that all tech companies do:

1. An ad-based business, where the users get access for free, and they sell the attention of and aggregate data about the users.

2. Let the users run their own ads, if they want, and charge them to use the system. A freemium model, where the base product is free, but advanced features that help you sell stuff through Twitter, cost money. (Users might even come up with new ways of advertising, given a chance to be creative.)

In the first model, it's inevitable that not only will Twitter force developers off their platform (as they already are doing) but the same will eventualy happen for news organizations that use Twitter as their notification system. As with developers there's a naivete among news orgs that Twitter is somehow a public utility. This is not how Twitter views itself, nor is it in reality what it is (it's a privately held corporation).

In the first model they basically compete with everyone who uses their service as part of their business. In the second model, they compete with almost no one, and simply make money off the growth of the activity.

I think they've gotten so large so quickly that #2 is the only viable approach. It's the same advice I gave Microsoft before they hit the wall with the Internet, and the same advice I gave Google as they were hitting the Facebook wall. Stop hiring outside the basic area you already occupy, and shrink that if possible, and get ready to take 50 percent of all the growth, and share the rest with others. It clearly would have worked better for Microsoft, and not so clearly (yet) for Google. But it's a predictable cycle that Twitter is advancing through very quickly because they're growing so fast, and because unlike Microsoft and Google, they never had a golden age when they were technically best at what they did. They've always been ragtag, and I'm pretty sure they always will. It's in their DNA. And besides, companies as they grow never get more competent, they always get less.

But Twitter has been advancing fast into model #1 -- advertising and aggregation of user data. The purpose of advertising is to turn cash into attention. Companies will be diseconomic about this, for a while -- but long-term they can't afford to. A company that bases its business on buying attention must get more value back than the money they spend.

People seek out commercial information on the Internet all the time. They look for it. Think about your own habits. Last time you bought something, how much time did you spend finding out about it on the net. I won't even go out to eat at a restaurant that looks good from the street, that was recommended by someone I like, without looking it up on Yelp and seeing what other people thought. It's amazing to me how unhelpful most vendors' sites are in my buying decision.

Ads almost never influence my buying decision.

Companies that spend a lot on advertising would be well-advised to instead spend the money on making their websites more helpful for people wanting to buy their products. Long-term that works, imho. Unfortunately for Twitter, their service isn't very good for providing info about products people may want to buy. I can't even keep track of what cities my friends are in with Twitter, the pulse is so rapid and the flow is so flat (which is good thing for news, btw).

Further, more and more product development is going to shift to the net. That manufacturing companies are going to become fullfillment houses for communities of users who know what they want, and contract to have it made. So the flow of information the other way, the opposite of advertising, is very important. Not just the aggregated statistical info where we're all unidentifiable hamsters turning wheels around, the other kind -- intelligence, smarts, even brilliance and vision, that comes from not being immersed in the very limited vision of Silicon Valley which boils down to "we know what's right." What's great about what Costolo said is that he admits they don't know what's right. Hold on to that, and never let it go. The wisdom about your product is not in SOMA, it's "out there" -- the rest of the world that SV works so hard to abstract and simplify. It's not simple, it's rich and very very different from what you think it is.

What would be really smart is for him to say "Hold on, I'm going to take a few months here and really start listening to what the users think about this product, without any expectations." And really try to understand. Tht would do more long-term good for Twitter than what's more likely to happen -- a series of off-sites and talking with tech industry insiders, and more viral ad-driven money schemes.

Bottom-line -- Twitter's manifest destiny, if it's to be successful, is what Biz Stone said the other day in London -- to be the news system of the future. Now take a step back from that, and ask what Twitter has to do, what they have to change, to get there. It might be pretty radical, but it's still not too late, believe it or not. And when we look back in 10 years, with the benefit of hindsight, I'm pretty sure it'll seem to have been the right thing to do.

 11/26/2010; 1:27:52 PM.   .