We are entering the next phase of Twitter’s maturity. With the IPO completed, it now has enough market validation and cash to be accepted as a valid advertising vehicle by major brands and the rapidly evolving Social TV industry. These are great targets for advertising, but there is another market that I see emerging over the next couple of years. I call this Vertical Twitter.

There are some features that all Twitter business users and advertisers need: targeted leads, high click-thru rates on URLs in tweets, and high numbers of quality followers. There are now good third-party tools for handling these generalized marketing needs, and Twitter’s own tools, such as the ads API and Cards, also do a great job, but I see Vertical Twitter as extending beyond marketing. The integration of API based technology into a company’s core business and sales functions will be the target of this next step in the Twitter story.

The integration of new computer technology has repeatedly followed the path from techie enthusiasts, business pioneers proselytizing in their workplaces, and eventual acceptance by businesses as a core part of their IT infrastructure. This evolution always starts with marketing and progresses to custom solutions for specific industries. We have seen it with productivity tools from 1980 to 1994, websites and blogs from 1995 to 2005, and now it is playing out in social networks from 2006 to the present. In each era products evolve from solving the simplest, most generic tasks into vertical applications aimed at the specific needs of realtors, financial analysts, doctors, lawyers, farmers, politicians, etc.

Twitter is uniquely positioned to lead social networking into vertical market applications. The combination of the Twitter API and hundreds of thousands of API developers gives Twitter the means and labor force to make this possible. You have probably been getting the same Twitter for Business emails I have from Twitter. There is no doubt that Twitter’s management also recognizes the value of small and medium businesses in selling advertising. Once these business understand Twitter better as a marketing vehicle, the demand for vertical apps that address other aspects of their business is inevitable.

One benefit of running an app within Twitter.com is that it will eliminate the need for the OAuth dance. That is the complex exchange that goes on between a website and the Twitter API when the user logs into Twitter through the website. This communication is necessary to deliver a set of authorization keys that can be used by the site to get the Twitter account information for the user.

You’ve seen this dance before, even if you didn’t realize exactly what was happening. You are on a website, and see a button that says . Clicking that button takes you to a Twitter controlled page where you can give permission for the site that sent you there to operate on your behalf. When you then give permission, you are sent back to the site to continue where you left off. This whole procedure confuses both the user and the developer who has to implement it. One way of measuring how big a hurdle this is for Twitter API developers is the fact that my tutorial on using OAuth is the number one visited page on this site. It gets about 30% of all of my site traffic, even though it was written 2 years ago. There is no doubt that the OAuth dance is a pain for everyone involved.

As part of making it possible for developers to run apps within tweets, Twitter will have the chance to streamline this whole process. The Twitter page will already know who the logged in user is. It is just a matter of making this available to the application code running within the tweet.

There are several possible to ways to implement an API that passes this info. I can’t predict exactly how this will be done, but I am sure it will have to be done. Think about what would happen otherwise. A user who is logged into Twitter sees an app in a tweet, and tries to interact with it. Will Twitter then send that user to another sign-in page to log in again? That makes no sense. There will have to be a transparent way to let the app discover who the current user is.

Explicit authorization by the user will still be necessary before the app can change the user’s Twitter account or tweet on their behalf, but the UI for that will also have to be handled by Twitter. Otherwise the clean and consistent experience Twitter is striving for will not be achieved. I handle UI issues like this all the time in the website apps I build for clients. I’m sure Twitter can figure out how to make it happen. They have no choice.

Putting these implementation details aside, the real take away is that apps within tweets will be easier to build and easier for users to interact with. That has to be good for everyone involved, and result in increased adoption and production of Twitter apps.

Now that I’ve relaxed and decided to embrace the idea of apps in tweets, the possibilities are amazing. What it all comes down to is ecommerce from within a tweet. That is the game changer. Right now tweets are only a pointer, not a destination. I can tell someone about a great restaurant, or book, or hotel, but then they have to click on the link inside the tweet to take action. What if I could tweet about a book I just read, and include an Amazon order form for that book within the tweet? Think that would increase the sales rate?

Now multiply that by every form of ecommerce, and realize that all of these application areas are open for commercial exploitation with tweets: hotel reservations, movie and concert tickets, music downloads, clothing purchases, stock trading. Basically the entire ecommerce field will get reinvented. Some current leaders will keep winning, like Amazon, but there will be many more new first movers in this space.

Yes, there are all kinds of issues about trust and security, but those exist on the web already. I remember when everyone was afraid to give their credit card to a website. Things are scary until they aren’t. Once they’re not, nobody worries about it. Anyone remember when microwaves were scary? Getting used to buying something from within a tweet will take a few months at the most.

Keep in mind that Jack Dorsey, Twitter’s chairman, also runs the payment service Square. What an interesting possibility for an acquisition by Twitter. At the very least, he is well aware of the internal issues of online payments.

Right now everyone is looking at Twitter’s attempts to tighten their control over tweets as an advertising play. That may be what they’re thinking about, but as an entrepreneur and Twitter API developer, I’m thinking about all the money to be made within tweets.

“We want developers to be able to build applications that run within Tweets.”
- @Sippey post on changes to Twitter API

I’ve been through the usual round of emotions in reaction to one of Twitter’s periodic “adjustments” to the Twitter API access rules. Denial and anger took a few days. I tried bargaining with my contacts at Twitter HQ earlier this week. Depression was yesterday. Now I’m up to acceptance. What would it mean to actually build apps into tweets? It could be really cool. (Note to self: adopt stance of suspension of disbelief. Act as if Twitter can build something this big in a reasonable amount of time. ) Sorry, back to acceptance.

As I was saying, being able to add your own code to a potential base of 400 million tweets a day is a huge amount of new real estate. Developers won’t be able to resist this much fertile territory. If everything people now do on the web can be done inside tweets, then Twitter becomes the new web. Imagine a web suddenly opening up with no apps. Think some people will try to populate it?

Let’s be honest. Twitter is now the transport protocol for the Internet. If a huge percentage of the information packets are sent and received as tweets, then more content and functionality should be attached to those tweets. Instead of passively residing on websites, this content and functionality will have a date, sender, and multiple recipients attached. It is a paradigm shift, and those always breed new waves of development.

But won’t that make developers even more dependent on Twitter? Yes. Won’t Twitter be able to arbitrarily kill competitors and substitute their own apps? Yes. Isn’t this just another huge case of letting a thousand flowers bloom? Yes. The risks are clear. The rewards are too great to resist. If Twitter builds this, the developers will come. The VCs will follow. The land rush will happen.

I’m a devoted Darwinian when it comes to biological and cultural evolution, so it is appropriate for me to view natural selection as the best product development strategy for Twitter as well. Twitter’s strength has been that it did less not more. Sure, it started with a simplistic friends and followers social graph, but that actually acted as more of a randomizer than an organizing factor. The fact that you couldn’t see both sides of many conversations was part of Twitter’s early magic.

Randomness is the hardest part of Darwinism to accept. The early opponents of natural selection insisted that an eye or a wing could never have emerged from a series of random steps. There must have been a universal product manager who designed them. Well, they said God  at the time, but today we would call this a product manager.

Today Twitter features like the #hashtag are a fundamental part of its experience, yet this wasn’t designed and imposed by Twitter HQ. It emerged from user behaviors and was promoted by advocates, like Stowe Boyd and Chris Messina.  New behaviors have emerged from the hashtag, like #followfriday. It is this emergence that makes Twitter a perfect environment for natural selection. Each small, random change must either be passed on by millions of users, or else it dissappears in favor of a better solution.

But Twitter can’t just leave its future to chance, can it? Won’t it miss out on all the hottest trends hyped by Techcrunch and the Valley gurus? The reality is that not only shouldn’t Twitter impose new constructs on its users, it can’t. Location is a great example. When Foursquare became the latest shiny new thing, Twitter went along and added location to tweets. How has that worked out? Less than 1% of all tweets include location data. I’m willing to bet that if Twitter users actually found location data useful, a convention for adding it to a tweet would emerge.

What Twitter can do to ensure its success is not try to add yet another must have feature. It should focus on scaling to handle the growth, and providing a freely available API for experimentation, and then step back and let natural selection do the rest.