Posted by Todd McKinney on January 16, 2008
Over at the Twitter blog, Biz (which I would guess isn’t really someone’s real name, but who am I to judge) has a post up that addresses the burning question of Why We Are Focused on Engineering and Operations. Not in so many words, what Biz said is “because we crash and burn too often”. I’m thinking most people knew the answer as soon as they heard the question.
I would offer that the interesting bits here are:
1. It’s reported to be a good problem to have, too much traffic/demand/opportunity/scale.
2. They’ve got no revenue, so it’s not completely surprising that the whole app has the performance characteristics of an intricate pile of wet spaghetti, duct tape, and the occasional bit of baling wire.
Now, I’m not trying to insinuate that they’ve gone cheap on this thing – there is a stellar bunch on the VC side of the equation and if you read the Fred Wilson post I linked to, they’re laser focused on getting to scale. Nor am I poking a stick at the developers/architects/geniuses who though it up, coded it and have to keep it running. I’m sure they’re doing a fine job. It does, however, seem to be a simple conclusion that the tradeoffs you make when you have a goose-egg in the revenue column look a bit different than what you build if you’re IBM or Google (or walmart or whoever). Even if you’ve got deep pockets making big bets.
It’s just different to be spending VC money than to be funding the development of a product out of funds that you’ve collected from customers, advertisers, or whomever in exchange for an established product or service. I’m starting to think that the difference is that the math is just easier if you’ve got revenue. Based on what people are historically willing to pay, you can pretty easily come up with your budget cap to spend on development, maintenance, etc. If you don’t know what people are willing to pay (or what the business model is and by implication how much cash you can bring in) then you have to guess. The one thing you know for sure is that the more you spend building it, the less there is to go around when it’s time to cash in. Or, depending on what your variable is in the equation, the quicker we run out of runway.
To me, this current bit of Twitter noise looks a lot like a pendulum swing in progress. Stability is now a strategic imperative, and “maybe we were a little too stingy a while back when it wasn’t important” – now go fix it. Been there. This business of free stuff making people rich is a complicated game.
Disclaimer: I know almost nothing about Twitter or the intricate workings of Venture Capital beyond all of the indisputable facts I’ve read on the internet. Mostly this is me thinking out loud.