I have written before about Twitter’s new rules and how they have backed away from platform promises. One of their new rules limits the number of user tokens a third party developer can issue before effectively being ‘owned’ by Twitter. (I say, ‘owned’ because Twitter apparently can then exclude them from the platform). Now the consequence of that seemed to be to subvert the development of third party apps. Basically, it would limit an app developer’s customers to a base of less than 100,000. As development is all fixed costs, that is like a big tax on the upside of entrepreneurship.

So how should an app developer react to this? One option is to stop developing apps. Another would be to develop an app and then realise that Twitter is basically rationing your output. This is normally a near impossible thing to achieve in software. But Twitter says to all third party developers; build something better than our products and you can have a slice but just a slice of the market. The rest will have to be left to others.

You know who also likes to limit suppliers to slices of markets: cartels. That is, basically, what a cartel would do: give everyone their share of sales and let them charge whatever price they want. Knowing that your competitors will leave the market to you, you can then set a price equal to the monopoly price.

And what do you know, this has already started to happen for Twitter apps. Today, Tweetbot for Mac was released. Tweetbot is considered the best mobile Twitter app around. But its Mac version fell under Twitter’s new rules. What that means that only 100,000 will be sold. So there is a big incentive for users to get in and get in quick. TweetBot have realised that and they have priced Tweetbot at an unheard of $19.99. This is for an app that does 90% of what Twitter’s free Twitter and Tweetdeck apps do. Not to mention a free website. But for heavy users, even a 10% improvement on something that is used all the time is worth it. Hence, they are the inframarginal customers that the monopolist can target.

What is going to happen here? Non-official apps for Twitter are all going to have a high price. They will be limited to a niche in the market but you can earn 70 percent of $2 million in guaranteed revenue from producing a superior product (in this case, Apple gets a cut). That is a healthy amount of revenue. The question is: will Twitter have its future eyes on it too?

FYI: I bought the program. It is the best out there and I don’t trust Twitter not to crimp its own products so I wanted to get in before the rush. There’ll be no sale happening here.

4 Responses to Twitter’s policies cause prices on third party apps to rise

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