5 Ways A Partner Ecosystem Builds Competitive Advantage

Rob Bailey
1st October 2013 1 Comment

A few lifetimes ago, I was on the executive team of an early competitor to Twitter called Frengo. Back then we were convinced we were going to crush Twitter with our wide range of exciting text messaging features like trivia contests. Wow, were we ever wrong. Fast forward a few years and Twitter has announced their IPO while Frengo was eventually acquired.

What is it that has made Twitter so successful, and Frengo….not as much? Hindsight is 20/20:

Twitter’s forced brevity, the immediacy of its connections, and its impact as a breaking news source are all key elements that have been covered many times. But Twitter has also built a really important competitive advantage with its extensive partner ecosystem which has given the social network a reach and impact that goes far beyond what its monthly active user (MAU) numbers would indicate.

I believe the officially reported MAU numbers MASSIVELY underestimate the actual reach of the network because Twitter’s ecosystem partners are driving additional, unmeasured (but important) viewing. Ever see a Tweet on a news program? How about ESPN’s celebrity Tweets during NFL games? I see great brand promotion like this all the time. So do brand decision-makers, sports event attendees, news program viewers and more. In fact, I wouldn’t be surprised if, measured together, the Twitter ecosystem drives a reach that is as big or twice as big as the official site visitor numbers might indicate.

The unpaid promotion and branding contributes to a competitive advantage over other networks (yes, in some ways even Facebook) in the competition for ad dollars, content creation and celebrity use/endorsement. This structured market of qualified companies help promote Twitter’s mission and makes its partners core to growth. But what’s made it work?

Drivers of a Successful Partner Ecosystem

Here are the five key competitive advantages that I see in a robust partner ecosystem:

    • Understanding Breeds Investment:
      I’ve presented hundreds of times in the past few years about the value of Twitter to executives in a wide range of industries including advertising agencies, news organizations, brand management, airlines and others. Not only is that free advertising that extends the brand name; it also helps educate those who have yet to adopt the network. I’ve found that advertisers and decision-makers are most likely to invest in platforms that they best understand (one of the many reasons why TV still gets hundreds of billions in ad dollars every year), that have clear paths to track success and that enable continued growth and improvement. Twitter’s Certified Partners help Twitter by doing all of that. There are partners that improve the Twitter experience. Twitter has in turn provided a lot of confidence and support to ecosystem partners like DataSift, and that’s made us confident to evangelize heavily on their behalf and invest in infrastructure that facilitates the use of Twitter data for company decision-making. 
    • Structure Creates Innovation:
      By keeping each of the Certified Partners focused on a specific need or use case, it’s helped focus each partner’s innovation. Twitter has worked hard to create a system where different companies are focused on driving value in different areas. Companies like HootSuite and Sprout Social offer unique analytics products & features that drive the ecosystem forward and improve their products. Using us as an example, DataSift has focused its innovation on improving reach and delivery. We have spent tens of millions of dollars developing cutting edge technology to process massive volumes of real time social data. Part of what enabled us to do this was the focus direction from Twitter.
    • Syndication Drives Compliance:
      Having official partners and syndicators has also maximized the rights and privacy compliant use of Twitter data. We review every potential customer’s use case of Twitter data extensively to ensure compliance before we sign any agreements with our customers. In the early days of DataSift, we would occasionally see a few “shady” use cases that companies proposed. But here is the funny thing: we don’t really get “shady” applications anymore. A great analogy for this is the online music industry. As legal alternatives for the online purchase/consumption of music like Spotify and the iTunes have proliferated, consumer’s interest in illegal file sharing has declined. Why risk getting sued by the RIAA when you can buy that new Lorde track on iTunes for $1.29? Companies have realized it just doesn’t make economic sense to build a company and invest in something that won’t get approved. In fact, DataSift aggressively monitors the market and we are always vigilant to try to help companies we think may somehow be using Twitter data incorrectly. It probably helps that the DataSift team are all passionate users of Twitter—we would never want to see anything happen that would negatively impact the user experience. 
    • Communication Breeds Trust:
      Twitter has in the past gotten some bad buzz for cannibalizing members of its ecosystem. I think that buzz was undeserved. Specifically, I’m thinking of the desktop and mobile clients that replicated the native Twitter apps put out directly by the company. I know this is a very controversial thing to say, but I believe that when you are a start-up that capitalizes on the success of a larger company’s ecosystem, you need to stay vigilant about the ecosystem owner’s plans and how your company adds incremental value to their overall goals. If you don’t, you will inevitably get passed by. At DataSift, we do it by constantly engaging with Twitter (and other major social networks) to get updates on strategy, what their needs are and what their “no fly zones” are. I’ve actually found Twitter’s team to be incredibly communicative about their plans for the ecosystem months and sometimes even years in advance of making any changes. This has given us plenty of time to adjust/fine-tune our strategies and investments. Twitter executives have been really clear about where the company is going and that has given us lots of clarity and comfort around ensuring we have strong and deep alignment with Twitter’s strategic goals. For example, here is a great interview Twitter CEO Dick Costolo did with Charlie Rose outlining the company’s plans. 
    • Staffing With A-Players Yields Results:
      From the beginning, Twitter has invested intelligently in staffing their Ecosystem teams. Since we launched DataSift, Twitter has assigned entrepreneurs to work with us that were so talented they could have been running their own start-up. I’ve had several VCs ask me when the ecosystem point people were going to start their own companies. (Given where Twitter’s post-IPO valuation seems to be heading, they probably made a smart move staying put.) In the past we’ve worked with alumni from Google and analyst companies like Forrester. They have been able to provide clear and insightful guidance on what products and features and geographies we should be focusing on.

Other Social Networks Are Catching On

I mentioned earlier that the brilliance of Twitter’s ecosystem has yet to be really well publicized but that doesn’t mean the word isn’t spreading. Lots of other major (and secondary) social networks have reached out to us in the past year with similar ideas and the pace of the inquiries is accelerating. We recently announced a global deal with Tumblr and we have more lots of big announcements on the way.

The quality of a Social Network’s ecosystem can be a strong and sustained competitive advantage and help it beat other social networks that do not make the same investments. Just look at the early competition between MySpace and Facebook. Guess which one invested more in building an ecosystem?

Rob Bailey

Written by Rob Bailey

Rob Bailey is the CEO of DataSift.