How could it be that millions of users sign on to a service like Twitter and voluntarily impose upon themselves a constraint to talk in no more than 140 character dollops at a time? Of course the answer is that they want access to the network, Twitter owns it and Twitter sets the rules. But then the question is why is a restriction like that the blueprint for a successful network.
Here’s an analogy. Imagine that you own a vacant lot where every weekend people meet to buy and sell stuff. You don’t charge any entry fees and you don’t take a cut from any transaction, you simply want to be the most popular vacant lot in town.
Every seller who is there selling stuff contributes value to the market as a whole and you internalize that overall value. But you and the sellers have a basic conflict of interest because they are maximizing their own profits and not the overall value of being in the market. When they raise prices they extract surplus from the people willing to pay high prices and in the process reduce the surplus of people who don’t.
From your point of view the extracted surplus is just a transfer of value from one member of your club to another, and what you really care about is the lost value from the excluded sales. So you will generally want lower prices than the sellers would set on their own.
Now think of each message in a social network as having two components: information and self-promotion. People follow you if you provide them with useful information. And if your information is useful some would even be willing to wade through some self-promotion to get to your useful information. But not all. The self-promotion is the price of the information and its a transfer of value because it costs the follower his attention and enhances the followee’s reputation.
From Twitter’s point of view the users are a bunch of tiny monopolists willing to exchange a little bit of overall surplus for a bit more of their own. 140 is like a price cap imposed by the owner of the vacant lot which boosts the information/self-promotion ratio of tweets.
The surprising thing is that some users aren’t just outright banned.
Cheap Talk 
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April 25, 2011 at 9:54 am
Peter Klein
Interesting analysis, but why look for an efficiency explanation when path dependence fits much better? They chose 140 is because they assumed most tweets would travel via SMS, which imposes a 160-character limit (and you want room for user names, hash tags, etc.). Now a whole culture has emerged around this haiku-like structure and people would be annoyed if Twitter went to 150 or 160 or 500 or whatever. Or am I overstating the transition costs?
April 25, 2011 at 12:27 pm
jeff
If Twitter wanted to raise the cap now they could. The transition could be made pretty painless, for example people (like me) who would rather go on speaking in haikus could be allowed to opt out (Twitter “classic”) Or we could just stop following anybody who talks too much.
April 25, 2011 at 5:17 pm
Hmm
I’m not sure I follow the logic of how a 140 cap boosts the information/self-promotion ratio.
Is the idea that it caps how much self-promotion users can add around each piece of useful information in each tweet? I guess I can see that. It’s much easier to skip a comedian’s separate ‘plug’ tweet than to skip the ‘plug’ part of a tweet that includes both a joke and a plug.
April 26, 2011 at 7:53 am
samson
good point about the tradeoff.
but what about the serial tweeters, who take over the feed? it’s still possible for the information-to-self-promotion value to be low as a result. i suppose market participants (info. consumers) are still responsible for choosing worthy recipients of their scarce attention.