“When are you going to be profitable?” might have been the question most often asked of Twitter’s executives over the past year.
Now the company apparently has an answer: “We are.”
Since its launch three years ago, the popular microblogging service has by its own admission been more focused on new features, improving service quality and building a user base that numbers into the millions than it has been on generating revenue.
“We’re spending 97 percent of our efforts in trying to build the product, and that’s not irrelevant to revenue. The irresponsible thing would be to take our eye off that. Long-term value is on users and how valuable it will be to them,” Twitter CEO Evan Williams said back in October at the Web 2.0 Summit.
Now comes a report today by Bloomberg BusinessWeek that Twitter is ending the year on a profitable note. The article said Twitter scored $25 million in revenue from a deal to make its content searchable by Google’s (NASDAQ: GOOG) and by Microsoft’s (MSFT) Bing search engines. Another Twitter partner, Yahoo, also recently added features to make Tweets available as part of its search results.
Real-time search deals may only be the beginning. As recently as last month, Twitter cofounder Biz Stone told Reuters the company planned to start making money in 2010 with new ad-revenue models.
The major search players have reached out to Twitter to add real-time content — that is, its members’ up-to-the-minute posts — to their search results. Many of the short tweets and posts in Twitter contain links to other Web sites and videos that relate directly to current events and breaking news.
“By presenting the latest discussion on Twitter about buzzing topics, we are bringing you a wider variety of voices on the Web,” Yahoo researchers said in a blog post earlier this month.
Analyst Ben Bajarin told InternetNews.com that to him, Twitter’s reported profitability “sounds plausible.”
“We’d have to wait and see what those deals brought in versus Twitters’ capital expenses,” said Bajarin, an analyst with Creative Strategies. “But it doesn’t take a massive army to run what they’ve got, so their overhead can’t be that high.”
New revenue models
Bajarin said he agrees that Twitter has a number of different opportunities to generate additional revenue, like bringing advertising onto the main site — as well as more advanced services.
“How people use Twitter now may not be how they use it in the future,” he said. “As an analyst, I use Twitter a lot differently than someone who just wants to say what they’re doing. It’s possible they could develop a model for business intelligence and more vertical services that would appeal directly to business users.”
In September, Twitter received new funding from investors including mutual fund giant T. Rowe Price and private equity firm Insight Venture Partners, which some analysts said could be a precursor to an IPO.
The most recent funding round reportedly totaled $100 million, a sum that theoretically values the company at $1 billion.
Article courtesy of InternetNews.com.