Twitter investment gets tongues wagging

Twitter has raised $35m from venture capital. But - all together now - 'how will it make money?'

Last Updated: 31 Aug 2010

The micro-blogging site is the latest twist on the social networking model to capture the public imagination, giving users 140 characters to tell the world what they're doing or thinking. It seems navel-gazing will never go out of fashion. The recent investment comes from Institutional Venture Partners ($14m), and Benchmark Capital ($21m). Together with unspecified additional funding by existing investors, it values the company at between $200m and $250m. And you can see why the suits are keen to get involved: Twitter's user base has increased by 900% in the last year.

Most of that traffic is driven by a familiar force - people's desire to keep up with the thoughts and deeds of celebrities. Stephen Fry currently leads the ‘Tweet' table, scoring a huge hit recently when he offered fans live updates of his time spent trapped in a lift. [Argh - Ed]. Yet Twitter's founders are hoping the system gains appeal as a means of contact between friends, while it is also becoming a handy tool for business, and an increasingly popular source of news and current affairs.

Such is the speed of take-up that trend-watchers have been asking the inevitable question: ‘is Twitter the new Facebook?' - like we needed a new version of something that's only been around for 10 minutes. The more pressing question, and one asked so many times of Facebook when it sold a chunk to Microsoft for $240m a couple of years back, has to be whether the thing will ever generate the kind of returns that justify the investment.

Even the firm's founders may not be sure. Twitter HQ has largely kept quiet on how they plan to profit. Ad revenues are most likely - if they can find a way to integrate ads into the system without troubling the users. Then there's the chance to charge companies for add-ons services to improve the way they ‘tweet' to customers. Right now Twitter's investors will be hoping it is indeed the new Facebook - not the new Friends Reunited.

In today's bulletin:

Cricket hit for six as Stanford faces fraud charges
Starbucks boss puts Mandelson in a flapuccino
Ashley promises figures as Sports Direct sales jump
Mobile phone companies on the charge
Twitter investment gets tongues wagging

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