Twitter's R&D Costs Are Skyrocketing Because It's Buying Out Or Blocking Outside Developers

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Twitter’s quest to capture ad revenue is driving up operating costs. The company’s research and development expenses are up 170% from a year earlier, and at over $US85 million equal to about half of revenue in the third quarter, according to an analysis by Bloomberg.

(By contrast the company’s revenue increased by 105%.)

The increase in costs is explained in part by Twitter’s method of eliminating competition from developers that generate ad revenue using Twitter’s data. Twitter, like Facebook, is a platform, and developers can use its data to build add-on or complementary apps, like services that allow users to build mini-stories with tweets. These apps, in turn, might generate their own ad revenue. Twitter is trying to exercise control over outside developers and their revenue streams by acquiring them or limiting their access, but that leaves Twitter to pay its own way in terms of building out innovative features. So both options are expensive.

In 2010, for example, Twitter changed its terms of use policy, shutting out two services, including Adly and 140 Proof Inc., which used the company’s tweet streams on their own ad-supported sites.

How Twitter’s strategy will affect revenue in the long term is unclear. (Bloomberg)

In other news…

Google is showing off massive upgrades to Google+ (Business Insider)

Facebook’s messaging app will let you message non-friends by phone number (TechCrunch)

Nextdoor, the social network for Neighbours raises $US60 million (The New York Times)

Twitter made an unsuccessful attempt to buy Frontback, a new photo-sharing social app. (TechCrunch)

A Forrester analyst says Facebook is failing marketers (Forrester)

BlueLine aims to become LinkedIn for people working in law enforcement (Fast Company)

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