Twitter goes looking for some income

Everyone knows about it, but the new social network isn't making any money. Photo / Supplied

On paper, Twitter is a tiny bird in a corporate world of soaring giants.

The microblogging site, which started four years ago, has a staff of 350 at its hip San Francisco HQ.

And despite being a brand that has sprung from nowhere to dominate new media and the public consciousness, it doesn't make any money.

And yet this week we learned that Twitter now has 175 million accounts, helping it to attract a new round of funding worth US$200 million ($270 million).

This vast injection from a group of venture capitalists hoping they're on to a good thing has boosted the value of Twitter to US$3.7 billion.

To an eye not focused on the peculiar world of the technology start-up, these figures don't add up, but the race to throw money into an apparent cash black hole proves investors remain desperate to snap up Silicon Valley's hottest properties.

"People invest not on the value of the cash machine now," says the chief executive of social media management firm Conversocial, Joshua March. "They are betting it will become the gorilla for the next cycle. But it is hugely risky."

Tech investors have had as many disasters as successes.

But increasingly Twitter, which has been embraced by celebrities from rappers to A-list actors, sportsmen and politicians, is being seen as a safer bet.

Twitter boss Dick Costolo also revealed this week that his site had gained 100 million accounts in the past year.

Crucial to the company's expansion - it has doubled its staff in the past year - has been a shift in mindset to making money.

Or at least that is the hope. One social networking professional said: "There is money to be made out of Twitter's audience. The company just doesn't seem to have found a way to do it yet."

The problem for Twitter was how to keep people joining and part them from their cash without driving them away with intrusive advertising.

"Growing big is not a success in itself," said Ev Williams, one of the site's three founders, who stepped down as chief executive in October.

"Success to us means meeting our potential as a profitable company that can retain its culture and user focus while having a positive impact on the world. This is no small task."

Twitter shied away from banner adverts across the top of the screen or promotions running down the side. Instead, in April it introduced the less obtrusive "promoted tweets" before adding "promoted trends" and "promoted accounts" of companies people might want to follow.

Next year it will be able to offer country-specific advertising, tailoring products to users.

After Costolo's appointment two months ago, the group said it was to increase the amount of advertising on the home site and through third party applications that allow easy access for users checking updates on smartphone and tablet devices.

Some in the industry expect the advertising model to develop "in a different direction" from traditional online advertising.

One suggested it could look to sell advertising around the content of people's tweets.

Dan Cryan, senior analyst at Screen Digest, said: "Social networking has never been that easy to monetise properly. "

On Thursday Costolo said: "2010 was one of the most meaningful years since Twitter was founded," adding "We're proud of what Twitter users have accomplished, we're proud of our work and we're very proud of our team". The investors may have to wait before they agree.

- Independent