Jubilee Over Twitter's Hint of Profitability

Squeezing $25 million from Google and Microsoft, Twitter ekes out a profit. Is the news too good to be true?

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When investors pegged Twitter's value at $1 billion in September, the public scratched its collective head. How could a site with no revenue stream and no desire to host advertising be worth $1 billion? Today, we get a hint of an answer. As BusinessWeek reports, Twitter earned $25 million from Internet-search deals with Google and Microsoft, yielding a small profit for 2009. Twitter also reduced its 2009 expenses by renegotiating more favorable contracts with telecom companies who distribute billions of text messages to and from Twitter. Reacting to the news, tech bloggers are hailing Twitter's meteoric rise (as they are fond of doing) and adjusting their predictions for its future as a viable business. At the same time, some question whether BusinessWeek's report can be trusted:

  • Twitter Has Tamed the Google Beast, writes Kit Eaton at Fast Company: "Even the mighty Google monster is slightly humble before the success of the lifecasting/microblogging/Facebook-challenging Twitter. Google has long made it clear that it wanted to get search working right up to the second, and it obviously couldn't get its own microblogging system working as well as Twitter, nor could it buy the company. The one remaining option was to pay Twitter for access."
  • Made Profit Without Even Trying, writes Spencer Ante at Bloomberg: "Until earlier this year, Twitter wasn't even focused on revenue -- let alone profit. The company attracted millions of users with a free service that posts 140-character messages, known as tweets. Chief Executive Officer Evan Williams said two months ago that the company was spending almost all its time improving the product, rather than seeking ways to make money."
  • Still Not a Sustainable Business Model, writes Jay Yarow at The Business Insider: "While the small profit is welcome news for Twitter, it appears to be almost incidental. It's certainly not the reason investors valued the company at $1 billion earlier this year. Twitter could hire a few more employees and wipe out the profit. Indeed, it says its looking at hiring talent through acquisition."
  • Twitter Is Profitable?! Not So Fast, writes Frank Reed at Marketing Pilgrim: "I now immediately place this story in the category of rumor. I suspect that if Twitter wants people to know that it turned a profit, no matter how big or small, they will let us know. Do I think they actually did turn a profit? I honestly don't know because I don't do their accounting and I haven't spoken to 'sources' who think that leaking corporate data is cool... What this looks like though is that BusinessWeek is starting to sound more like the tech blogs and new world media that it has fought against. Verify facts with the company being covered? Nope. Two anonymous insiders will do because the story is 'hot.'"
  • What's Next for Twitter Om Malik at GigaOm expects Twitter to expand in three big ways: "*New management team including several new 'C'-suite executives. *Infrastructure to scale their network to accommodate future growth. *Hiring more engineers and other key people as it tries to build out the service."
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