take app.net for example…

This is the unedited English version of my column published in Japanese by Sankei.

http://www.sankeibiz.jp/business/news/120806/bsj1208060502001-n1.htm

app.net is a new platform that aims to replace twitter.com. It would
be safe to call it a twitter clone. The social network will have the
ability to post status updates and photos to friends and those
following you. The one major difference between app.net and any other
social network you have ever used is that app.net is a paid service.

Basic membership on the platform gives you twitter like functionality
and will costs $50 a year. But developers who want more access and
functionality on the platform have to pay $100 a year or $1000 a year,
depending on the amount of access and support they want.

app.net was launched by Dalton Caldwell, a serial entrepreneur who
started an online music company called Imeem that was acquired by
Myspace in 2003. Before changing the companies’ focus to app.net he
built a mobile photo sharing application called picplz.

Picplz pre-dated instagram and the lead investor in Dalton’s company
also invested in Instagram. Many people forget that Instagram started
as a check-in application similar to Foursquare, when Instragram
changed their business model to do photo sharing instead, Andreessen
Horowitz who previously invested in both refused to invest more money
into Instagram because of the conflict of interest between Picplz.
When Instagram was acquired for $1B dollars many questioned the
investment decision of Andreessen Horowitz.

Regardless, the end result is that Instragram won and Picplz lost, so
Dalton Caldwell decided to refocus his company on a new service. The
new concept that Dalton came up with was App.net, built to help
developers get their application noticed by users on facebook.
Dalton’s team developed technology to show users the apps that their
friends were using and recommend apps that they might be interested
in.

During the process of refocusing the company Dalton often discussed
his plans with the Facebook developer relationships team and parties
responsible for working with outside developers. Eventually the
Facebook team invited Dalton in to give a demonstration of his new
application.

But it turns out that it wasn’t just a demonstration Facebook wanted
from Dalton, they wanted his company. According to Dalton they planned
to release a service very similar to what Dalton was building and
planned to monetize it via advertising. This meant that Dalton’s
service wouldn’t have a chance to compete, so they offered to hire his
entire team and buy out his company.

This is a normal practice for Facebook, twitter and Google, if they
see an engineering team doing something interesting they will often
hire them just to get ahold of the talent. Oftentimes that means that
they will shutdown the product that the team was originally working on
and move those engineers towards focusing on similar internal
products.

But Dalton strongly resented this, he felt that Facebook was forcing
him to sell or be destroyed.

This is part of a much larger issue that developers creating facebook
and twitter applications are constantly dealing with.

When a company creates a application on top of Twitter and Facebook
they are basically building tower mansions (apartment buildings for
those outside of Japan) on land owned by someone else. There is no
guarantee how long developers will be able to use this land, nothing
stopping the owner from selling the land and more importantly, the
land owner, twitter or facebook could see how profitable your tower
mansion is and tell you to move the building, only to build a exact
copy in the same location.

While common, often times Twitter or Facebook simply ask to buy your
building and stay with the company after the acquisition, like
Instagram. Unfortunately all the companies similar to Instagram lose.
Like Picplz. And now it seemed it was happening to his new app.net
service before it even got started.

Developing on these platforms is a double edged sword. On one side you
gain access to a billion users but on the other side, your business is
totally dependant on another company with profit motivations.

Dalton’s concern is twitter and facebook don’t have the best interest
of users in mind, their main motivations in business is advertising
revenue and monetizing those users. Often times this need to monetize
users can destroy the businesses making money on top of their
platforms, if they think they can adapt those ideas for themselves.

Developers continue to develop on these platforms this but the
business relationship isn’t a comfortable one. This is the origin of
Dalton’s frustration, and I’m sure the threat of being put out of
business by Facebook was also part of his motivation to create a
social network free of the need to monetize users by conflicting with
the same developers responsible for growing its user base.

The new app.net aims to be a social network that instead of monetizing
users from advertising will make money from users paying a
subscription fee. Instead of forcing developers to change their
applications to support the companies advertising technology, they
will charge developers for access to the platform.

A few years ago while at Columbia Music we built a music platform for
artist to better connect with music fans. We felt that musicians
thought the existing music industry was broken, and benefited the
music label more than the artist and fan. We called it OtoRevo (sound
revolution in Japnaese) because we wanted to flip the equation; it was
a revolution of sorts.

The twitter and facebook platform is very similar to incumbents music
labels, but the problem with our revolution and the problem with
Dalton’s revolution is that music fans weren’t angry with music
labels, sure they weren’t pleased with everything labels did, but a
revolt requires a lot of anger from a significant portion of society
that just wasn’t there.

So while developers might be upset with the way twitter and facebook
goes about their business, and perhaps tech savvy consumers like you
and I might be a little uncomfortable with our social networks’
actions being used to sell our attention to advertisers, we aren’t
really angry, are we?

Dalton said if he can’t raise 500,000 from users and application
developers he won’t build this new revolutionary service. I think the
guy is crazy for trying and the lack of money he has raised, $200,000
with less than we week to go, I’m probably not alone in this thought.
I don’t think he will make it, but I will pay $50 anyway because I’m
crazy and sometimes we need to believe in the unbelievable.

And I’ll get a refund if he doesn’t reach $500K anyway, so what the heck.