Twitter's Bonehead Move a Sign of Things to Come

Imagine you're fed up with the crazy rants your "friend" continually posts on Facebook (NASDAQ: FB  ) . What do you do? You block him or her from seeing your posts, and you from seeing theirs, then you aren't subjected to their craziness in the future. Seems simple enough.

Twitter (NYSE: TWTR  )  took a different tack when it decided on Thursday what constitutes privacy for its 232 million monthly active users (MAUs) by changing its policy when tweeters wanted to block their posts from those they'd gotten tired of. Sure, you could block them, but after Twitter's policy change, they'd still see every post you tweeted. In an age of heightened awareness surrounding privacy issues thanks to Edward Snowden and the NSA, what in the world was Twitter thinking?

The specs
According to Twitter, the problem with the old, and now new, policy was that blocked tweeters were alerted when a user opted to cut them off. That, Twitter said, was the impetus for those who were blocked to begin a tweeting rampage of abuse against the person doing the blocking. That sort of makes sense; no one wants to be cut off, and it's not hard to imagine some angry tweets as a result.

To fix the possibility of user retaliation after being ostracized, Twitter updated its policy so that blocked folks wouldn't know they were being blocked. Problem was, the updated policy allowed the blocked users to still receive all the tweets sent from the person who blocked them, and that struck a nerve that resonated across the Twitter universe on Friday. Within hours, nearly 2,000 users had signed an online petition to do away with the new policy, and to its credit, Twitter listened -- albeit grudgingly.

Twitter's statement announcing its intention to revert to its original privacy policy was quick and, based on yesterday's stock price movement, well received by investors. But even after the firestorm the policy change caused, Twitter didn't fess up and apologize. Instead, Twitter said, "We believe this [reverting to the old policy] is not ideal, largely [because of] the retaliation against blocking users by blocked users (and sometimes their friends) that often occurs." And that mind-set that says "don't worry; we know what's best for you," is just a precursor of what's to come from Twitter.

The tip of the iceberg
Just like the early days of Facebook, Twitter investors are betting on its ability to monetize its growing MAUs, and that means pushing the privacy and user data envelope to lure advertisers. Facebook is hardly immune to user backlash when privacy issues arise. When Facebook bought Instagram earlier this year for a cool $1 billion, CEO Mark Zuckerberg was forced to address privacy concerns surrounding Instagram's policy allowing it to employ user data in advertising initiatives without their permission.

More recently, Facebook proposed changing its privacy policy that opponents suggested would open the door to unauthorized use of user data for, not surprisingly, advertising. Facebook said it only wanted to "further clarify and explain our existing practices." Sure.

Improved advertising click-through rates equate to increased revenues, which Facebook can attest to. The 66% jump in Facebook's advertising revenues in the recently announced Q3 compared to last year isn't an accident. Facebook is learning more and more about the habits of its 1.2 billion MAUs and using that information to lure its bread-and-butter: advertisers. Twitter has to do the same thing, sooner as opposed to later, to even come close to justifying its crazy valuation.

Final Foolish thoughts
The notion, as some in the media have suggested and apparently investors bought into, that Twitter's quick response to fixing its monumental mistake is indicative of what a great company it is, doesn't fly. Twitter's statement made it clear that it changed back to its original policy grudgingly, and that should speak volumes to users going forward.

The scary part? Twitter's policy change, and the manner in which it responded to user backlash, is just a precursor of things to come. Twitter, like Facebook, may not be in the same league as the now infamous NSA, but you can be certain tweeters everywhere haven't heard the last about user privacy. Shareholders demanding increased advertising revenues to warrant its nearly $33 billion valuation will make certain of that.

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