WHY FACEBOOK AND TWITTER ARE NOT MOST INNOVATIVE COMPANIES

BOTH COMPANIES HAVE TURNED THEIR FOCUS AWAY FROM USERS AND TOWARD SHAREHOLDERS TO GET BIGGER, NOT BETTER. REVENUE IS GREAT, BUT NOT AT THE EXPENSE OF THE PRODUCT.

The simplest reason Facebook andTwitter are not on this year's Most Innovative Companies list: Neither produced innovations worth celebrating. A spot on MIC, as we call it, is not a tenured position. Every year, we assess innovation and the impact of those initiatives. In the history of our list, fewer than one-third of the companies return from one year to the next. This year, only seven are consecutive honorees, an indication of how more companies in more corners of the world are innovating to seek a competitive edge, with the stakes only getting higher.

Facebook and Twitter deserve special comment because they have been among the rare perennials, and their recent moves reveal two companies engaging in innovation's evil twin: short-term thinking at the expense of long-term value. Facebook's most notable product achievement in 2012 was Poke, a facsimile of Snapchat, the trendy-with-teens (and sexters) photo app. Poke stumbled almost immediately. In fact, Facebook has made a cottage industry out of chasing hot Internet services (Pinterest and Yelp included), instead of developing new ideas to delight its billion users. Similarly, Twitter's product strategy feels wholly defensive. Its most notable new feature is photo filters, a plainly unoriginal addition.

Both companies have turned their focus away from users and toward shareholders to get bigger, not better. Revenue is great, but not at the expense of the product. Twitter's focus on improving ad revenue requires a consistent experience across the web, smartphones, and tablets, so it forced its once-elegant mobile apps to conform to a clunky desktop look, because that model works best for advertisers. That's the exact opposite of how product development is supposed to go.

Facebook, facing the strain of a tumbling stock price last summer, has transformed the implicit understanding of the site--my posts will be seen by those who want to see them--into an advertising opportunity. It freely admits that only a small percentage of posts make it to friends and fans, but it can fix that if you buy ads. To compound matters, Facebook's aggressive mucking with its privacy policies has bred a deep distrust of how the company uses the content shared on Facebook (and Instagram) among a significant, vocal segment of its users.

Neither service is a lost cause. Yet. But both would be well served to revisit what made them special in the first place: engaging with peers, not merely consuming content from brands and celebrities; being a creative platform for developers; and championing social media where users, not advertisers, call the shots.

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