Being Evil or Just Following Incentives?

Anyone who has studied economics has heard of this word many times: ‘incentives’. It is what shapes our behaviours. It can explain pretty much why any of us do what do we do. The difference is merely that some of us have lines we do not cross. (You could say, we have an incentive to not cross that line chasing another more selfish incentive.)

In the past couple of weeks, we have watched the true nature of many companies come to light or fruition. Twitter announced a change to their API. This was seen by the first of many unwanted changes to come – and they’re probably right. The first casualty of the new API changes was the Tweetbot alpha. They couldn’t get enough tokens under the new token limit and Twitter refused to give them more. While Tapbots are reassuring us that the full Mac version will not be affected, one can’t help but be skeptical of the whole debacle.

If you look at the way the announcement was worded, and how Twitter has been behaving over the past couple of months (not just the recent announcement), you’d know that these changes were probably a matter of time. There’s somewhat of a huge uproar on the Internet over how Twitter has become another massive overlord, wielding its power over the Internet. All that has really happened is that Twitter is now focused on making money. People forget really quickly what a free service is really selling. In this case, Twitter really, is selling access to you.

We’ve seen this happen everywhere. We love free things – but economists will tell you that ‘there is no such thing as a free lunch’. This dissonance will always occur whenever the value of the service to the business does not correspond to the value of the service to the customer. The business will always respond to its incentives: it needs to make money. The lines they aren’t willing to cross are the ones which will lose them most of their customers. They are more than happy to cross lines which will make them lose a small number of them. It’s been made clear that Twitter owns the dominant mobile clients.

Are developers being shafted? Perhaps they are. Many of them have been building clients for a while now. Twitter’s iOS client was originally a third party client. But times have changed – and if it hasn’t become clear by now, any time you build off someone else’s platform for free, you can certainly expect to run into issues. There will always be the systemic risk that that platform will be yanked from under your feet.

Maybe your client is growing so large, that it is a risk to the platform owner’s business. You may not have thought about this, but if the most popular Twitter client wasn’t controlled by Twitter, that would make Twitter be at risk of the client going rogue. Can you imagine the problems it would cause if the Twitter client used a different link shortener? A different picture service? Twitter also has to sell ads – imagine if this rogue client refused to comply and doesn’t display ads correctly. Heck, this rogue client might even work with and start moving Twitter users there! The horror!

That’s the other thing – always think about what value you are offering the platform owner. If all you are offering is spending their money using their servers to further your own goal, you can expect that one day, that free lunch will be over. Sometimes, the incentives might align. The iOS App Store, for example, really has no obligation to developers. Their obligation is to their customers, the people who buy apps. However, their incentives align with developers. Why? The App Store takes a cut. You sell more apps, both you and Apple make more money.

Is that going to last forever? Probably not. Things change – and one day, the incentives you took for granted to be everlasting and unchanging are going to mutate, and when it does, it might stab you in the face.

Edit: Here's a fun analogy that I think is worth a read: Why Are People So Upset With Twitter? Let’s Grab a Bite