Twitter's Innovation Drought

Sure, it's growing like crazy. But growth and innovation needn't be either/or pursuits, especially when you've got Twitter's cash

By Eric Jackson

I love Twitter. I'm in the minority of users who check it and comment at least a couple of times each day. I even have two accounts—one personal (@ericjackson), and one for my company, activist investment firm Ironfire Capital (@ironfirecapital). I set up my personal account over two years ago and have watched in surprise and admiration at how widely the service has been adopted. Forget Oprah. When I finally saw some of my formerly not-very-tech-savvy friends signing up a few months ago, I knew Twitter had gone mainstream.

Twitter's three thirtysomething co-founders—Evan Williams, Biz Stone, and Jack Dorsey—have been on a media blitz of late. And how can you not be happy for these guys? They're all down-to-earth. No hint of arrogance or entitlement. It's a feel-good success story.

People who cover Twitter in the media often criticize it for its lack of revenue, even with its impressive growth. However, I have grown baffled and annoyed at one of Twitter's greater nonaccomplishments: Since I've been using the service, its functionality and offerings have barely improved.

It's virtually the same Twitter experience today as it was two years ago. The only difference is that there are more users. You update, follow, unfollow, reply, or send direct messages. That's it. I understand that part of Twitter's power is its simplicity. But there are still no ads, search isn't easily customizable or useful, and there's been no evident push into location-based services despite the talk.

outside innovations

To view the most creative innovations in Twitter from the last couple of years, you have to look outside the company, to related third-party applications or services that have cropped up using the Twitter platform. I use TweetDeck as my desktop client for checking on my Twitter stream during the day; it's infinitely more efficient than the company's own clunky site. I often check on stock news through StockTwits. I shorten links using bit.ly or another shortening service. Yet all these helpful innovations have emanated from outside Twitter's confines.

I'm all for opening up your service and getting other people to create apps and services that ride on top of your platform. Everyone wants to be open these days. Facebook's doing it. Yahoo!'s (YHOO) doing it. It makes sense to get others to work for free on tools that make more users dependent on your platform.

Yet I still have had this nagging question: What are employees inside Twitter working on to make the service better? At the recent D7 conference in Carlsbad, Calif., Williams and Stone confirmed that Twitter has 43 employees. This is a big increase over years past, when there were only about 20 people working at the company.

Venture capital friends have told me they usually estimate a company's cash-burn rate at the number of employees multiplied by $100,000 a year. This implies it would cost Twitter $4.3 million a year to keep going at its current size. Bump that up a little because of extra server needs compared with most tech startups. At that pace, with more than $55 million raised to date, the company likely has another 6 to 10 years with the current cash in the bank. And the truth is, Twitter could raise much more if it needed to—likely at pre-bubble valuations, judging from the $200 million Facebook recently raised from DST Ventures.

So my question remains: Why is this company being slow to seize the opportunity in front of it? Why are there not more features, services, or ads being tested? To be fair, Twitter has search, which it didn't two years ago.

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