Who Will Own The Twittersphere?

(MoneyWatch)  The race is on to see who can best capitalize on the Twitter phenomenon, and the betting's not on Twitter itself. Twitter has already proven that it serves a purpose well beyond "what are you doing now," which early adopters (and maybe its founders) took literally, and is being used by everyone from professional athletes to politicians to communicate directly with their fans and supporters.

The general assumption is that Twitter will find its calling (generate tons of revenue) as a platform to be used by companies, particularly those in the consumer goods business, to track their brand images on a moment-to-moment basis. But while Twitter may be the medium by which they do this, the real winner may be other vendors who figure out how to organize the information on behalf of their customers.

• Salesforce.com, the first major vendor to figure this out, introduced a feature linking Twitter comments to its customer service application in March that helps customers like Dell and Comcast track customer complaints and other comments, thus giving them the ability to respond quickly and repair damage before it gets out of hand;
• Microsoft, which earlier this year fiddled around with Vine, its own version of Twitter, introduced a feature that integrates feeds from Twitter with Microsoft Dynamics, its own on-demand application suite for managing customer relationships. As with the Salesforce feature, the application is built to allow customers to follow trends of customer sentiment and create an organized response;
• CoTweet raised $1.1 million last week, as investors like Baseline Ventures and Founders Fund, among others, bet that the vendor's service, which allows multiple users to "manage multiple [Twitter] accounts, monitor keywords and trends, get email notifications timed to when [customers] are 'on duty,' [and] create conversation threads," will be a hit with B2C companies. CoTweet has already signed on an impressive array of companies, including Whole Foods, Starbucks, Microsoft, JetBlue, Ford, Pepsi, Sprint, and Coca-Cola as customers.

So where does that leave Twitter itself? Well, for one thing it leaves Ron Conway, an early investor (who also invested early in Google), scrambling to respond to criticisms from the likes of shady dealer Rupert Murdoch and other executives who disparaged Twitter's prospects while gathered at Allen & Co.'s annual Sun Valley technology conference last week.

"We have media execs in Sun Valley commenting on this space. What they don't realize is it's really early. It's Google in 1998... Innovation does not happen in Sun Valley. Innovation happens in Silicon Valley."

Well, CoTweet is based in San Francisco, and while that doesn't count as Silicon Valley, it's as much of a threat to Twitter's business prospects as any company that counts VMware, Xerox and other corporate inhabitants of Palo Alto as neighbors. CoTweet, and others of its ilk, are threats to Twitter precisely because they're not Twitter and not beholden to a community of early adopters who have nurtured the company, put up with early reliability issues, and created a venue for their own conversations. Twitter isn't in a position to wall those people off or find ways of charging for a service that was heretofore free. CoTweet, TweetDeck, Seesmic, Tweetie and others don't have that constraint. Is there any greater testament to Twitter's dilemma than the companies that have sprung up to capitalize on its outages by selling "Fail Whale" paraphanalia?

Twitter co-founder Biz Stone had suggested earlier this year that Twitter will begin charging businesses for some types of services, but others have jumped the line. How can Twitter top them? The use for Twitter is so obvious, especially now that entities like the City of San Francisco are using it to perform vital public services, that it's not impossible to imagine a scenario where Twitter ends up on the public teat. But it's becoming increasingly difficult to see how Twitter will profit from services that other vendors are now providing in its place.