This is why investors see too much risk in Twitter-dependent companies

It started way back in 2010 when, just before their first Chirp developer conference, Twitter shocked their developer community and ecosystem by buying a Twitter client and making some other moves that essentially put a stop on capital investment in any third-party companies that relied on the Twitter API or partnering with Twitter.

Twitter tried to assuage fears, but it never really worked. Investors have shied away from Twitter-dependent start-ups ever since, and probably for good reason. Over the past several years, Twitter has continued to show all signs that the API is a dangerous place for third parties, capriciously shutting down and blocking apps left and right (no matter their size) and steadily increasing restrictions on API policies.

Recently Twitter has been making more noise about “cracking down” on the use of the API, blocking LinkedIn among other things. And today, according to GigaOm, they have their sights on Instagram: Twitter blocks Instagram from “find friends” feature through API.

Back in April 2010, I suggested that it might be time to consider becoming “less intricately linked and integrated with Twitter and the Twitter platform”  and noted that there have been no Zynga-like hits in the Twitter platform ecosystem.

I still operate a few free services that require the Twitter API. Luckily, I don’t expect those services to pay my bills and I fully expect that one day Twitter will shut them all down, for one ex post facto reason or another. Their API has become an Albatros and double-edged sword. It was what they needed to get off the ground but now they wish it were gone. It’s also a catch-22: the service isn’t good enough that they can charge for it, but it costs Twitter too much to give it away for free.