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How Apple and Twitter Kill the Small Fish

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Instapaper is easily my favorite iPad app. In a given day I might come across at least a dozen articles and blog posts that I'd like to read, but not at the moment. Instapaper lets me quickly save them -- from the browser on my laptop or on my iPad, or from apps like Slate and Twitter -- to an easy-to-read, ad-free format for comfortable perusing when I have time. It's massively convenient, and it provides an easy-to-access archive of things I've read lately in case I want to link to them.

But when I upgrade (for free) to iOS 5.0 sometime this fall, I might just ball up Instapaper and toss it. That's because Apple’s new Safari browser, announced at its Worldwide Developers Conference last week, includes a feature called Reading List that duplicates Instapaper's key features. Sure, Instapaper already has my five bucks, but I would imagine its growth projections are in some doubt, with its main features being baked into Apple's next generation of computers, iPhones and iPads.

This fact wasn't lost on Marco Arment, Instapaper's developer. Here is a link featuring the tweet he sent out upon hearing about Apple's Reading List feature, although I must warn you it's not exactly safe for work, and it consists only of one word that rhymes with "chit."

Instapaper isn't the only Web service that's suddenly in danger of being irrelevant because the bigger fish it clings to, lamprey-like, has duplicated its functionality. The cottage industry of photo-sharing and link-shortening services for Twitter --, yFrog, Twitpic, et al -- are in a precarious position now that Twitter offers automatic link-shortening and native photo sharing (including a slick tweet-from-the-camera-app feature in Apple's new mobile OS). And Apple's unveiling of the iCloud personal file locker has cast into doubt the value of untold numbers of iOS apps that stream media and share documents between a user's devices. On a smaller scale, the new to-do lists, reminders, messaging and notifications in iOS 5 should also wipe out a smattering of small apps that have been peddling those services in Apple’s App Store.

What's happening here isn't intellectual property theft, it's a natural consequence of Apple and Twitter refining their offerings by adding convenient features. If a company's main business is a service that piggybacks off a bigger company's product, and the service is something the bigger product could take on itself, that company doesn't have a viable product. It has a temporary business that fills a hole the big boys haven't addressed yet, and it's liable to be rendered redundant.

Something to think about before investing in that next great iPhone social photo-sharing app.
POSITION:  No positions in stocks mentioned.