“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.

The thing I find so great about doing Twitter consulting is the wide range of vertical applications that are completely open for new development. One of them is higher level education. We’ve just launched a new site called Social Studies that applies the techniques of tweet aggregation to help students study collectively.

This work was done under contract with a Colgate University freshman student, Peter McGrath, who has a vision for the next generation response to Facebook. Peter grew up with social networks, and now wants to use his experience to add a social layer to college study. I think this may be an example of Web 3.0 in its earliest stages.

This first version of Social Studies is a tweet database that lets you view tweets based on colleges and individual classes, but the next phase of development will add a point system and game dynamics to make the whole experience a lot more fun.

Do you have a vision of the next great application for Twitter? We can help you bring it to life.

The Dot Com and Web 2.0 were classic bubbles, because they raised unreasonable expectations based on a financial fallacy. The unreasonable expectation was that anyone could get rich, and the fallacy in both cases was the belief that the money for these riches would come from a “greater fool.” At least in the Dot Com the greater fool was the stock market, which is reasonable. The greater fool in Web 2.0 was Google, which was going to buy all these start-ups for tens of millions. Google has some problems, but they aren’t fools.

The Dot Com people who ended up with worthless options looked to Web 2.0 as their chance to finally cash in on a bubble. They were wrong. Maybe they’ve learned their lesson and the next technology wave will have a different goal.

It’s easy to see that Web 2.0 is winding down. What isn’t clear is where the next wave will come from. The most likely place to watch for signs of another wave is the people who were displaced by the end of the current one. I’ve seen four technology waves since I got out of college in 1978, and one thing they all had in common is that they were founded by losers.

Web 2.0 was built by people who lost their jobs after the Dot Com crash. They were unemployed from 2001 on, and they kept active in tech by blogging. These skills and social contacts evolved into the social networking sites that dominated Web 2.0.

Before that the Dot Com companies were founded by two groups. In New England especially the network engineers who lost their jobs when DEC was sold founded the network infrastructure companies, and the software people who were locked out of the retail market by Microsoft’s monopoly started the websites. I was part of the later group.

The conversion of PCs from consumer tools into corporate LANs was carried out by independent PC consultants who lost their jobs in the late Eighties and went to work for their biggest corporate clients.

And in New England again the first microcomputer companies in the early Eighties were founded by refugees from the dying minicomputer companies.

Of course, there were always fresh college graduates who added new ideas to each wave, but the industry veterans who were unemployed or underemployed made up the majority of the labor force each time.

What does that tell us about the next cycle? I think that refugees from the startup culture of Web 2.0 are going to begin a search for a new business model. Near the start of Web 2.0 it was almost impossible to hire good coders, because they had been traumatized by seeing their Dot Com options die, and were convinced they could do a better job themselves with a self-funded startup. Very few Web 2.0 start-ups every realized that golden flip to Google. This is still a very talented group, so I’m going to watch what they do over the next couple of years very closely.

It can be argued that AOL’s purchase of Time Warner in January of 2000 marked the exact end of the dot-com, and now I think they’ve done it again with their purchase of Techcrunch. For me Techcrunch, the blog that was written by Mike Arrington alone in 2005, was the reason I got back into software after retiring. His excitement over the new wave of software that came to be called Web 2.0 was the first sign of real life I had seen since the dot-bomb crash.

In software it is all a matter of riding the waves, and Mike nailed the Web 2.0 wave perfectly. Now I think he is signaling the close of this wave. That’s great, because I want to ride another wave, maybe my last before retiring for good, and we need to close this one before a new one can start.

The first Web wave was about companies building simple, brochure style websites. The second wave added online tools, social networking, and user generated content to this website foundation. I’m betting that the third wave will be companies upgrading their brochure sites to incorporate all the features from the second wave. That’s why I am focusing on the Twitter API as a key ingredient in this coming third wave.

The first wave was from 1994 to 2000. The second wave was from 2003 to 2010. I think it’s a safe bet that everyone will recognize that the third wave has begun in 3-4 years.

Update: Sarah Lacy agrees with me.