While Wikipedia founder Jimmy Wales has launched another one of his famous and recurrent campaigns seeking public donations, the relatively new yet ultra popular microblogging site, Twitter, has asserted that it has a lot of money in the bank, to rubbish reports that it was close to launching a hunt for funds.
Speaking at the Web 2.0 conference on Wednesday, Twitter co-founder Evan Williams made it clear that the site was not anywhere close to running low on capital. Williams, who recently stepped down as the CEO, however, remained tightlipped on the details. Besides hinting at the contribution of recently introduced promoted tweets and trends, which allow special ads to appear in certain parts of its service, Williams did not divulge financial details.
This assertion at the San Francisco conference comes amid rumours that the company was in discussions with investment firms about funding. A popular technology blog, TechCrunch, reported earlier that Twitter was considering raising funds that would value the company at $3 billion (1 billion pounds) and that Russian technology investment firm DST Global was leading the funding race.
Noting that the planned $3 billion (1 billion pounds) funding would be larger than the $100 million (62 million pounds) that Twitter raised in September 2009, the report said that DST, which has invested in Facebook, Groupon and Zynga, was just one of many twisting arms to get in.
With the latest remarks of Evan Williams, the question that lingers now is - how did Twitter accumulate a lot of money in the bank?
Twitter, which was launched in July 2006, allows users to post short messages that are 140 characters long, known as Tweets, to reach a group of their followers. Over the years there have been several questions raised on the revenue generating potential of Twitter.
Even though the 2009 fund raising exercise, backed by investors including Insight Venture Partners, Spark Capital and mutual fund giant T. Rowe Price, brought the value of the company to $1 billion (628 million pounds); it further strengthened the concerns over Twitter's ability to sustain itself.
A landmark shift came in April 2010, when Twitter unveiled a new advertising program. Analysts saw this ad programme, then labeled as and now famous as 'Promoted Tweets', as the first step taken by the site to evolve into a self-sustaining business since its launch.
Addressing the concerns over money-making potential of site at the launch of the ad programme, Twitter co-founder Biz Stone had said, Over the years, we've resisted introducing a traditional Web advertising model because we wanted to optimize for value before profit.
The new advertising platform was designed to display messages from advertisers like Starbucks, Best Buy Sony Pictures, Virgin America and Red Bull on Twitter search results pages. What was very interesting was that the ad plan was received quietly by the users.
Commenting on Twitter's ad plan, a website dedicated to observing and reporting on social media had estimated that ads put into the stream by celebrity Twitter users can earn the site as much as $10,000 per tweet. Even if the estimate is halved or quartered, one can say the promoted tweets definitely formed a huge chunk of money for the site, which back then, according to ComScore, enjoyed over 22.3 million unique visitors in the United States alone.
As the industry analysts predicted, 'Promoted Tweets' was the first step. Twitter went on to implement a slew of related advertisement platforms.
Twitter initially featured ads in search result pages. The ads were later launched in trending topics section to increase the visibility of the ad and in turn bring in revenue. This is now referred to as 'Promoted Trends'. On clicking a trending ad, the user is directed to a search results page with the advertiser's promoted tweet listed at the top. Rumours have it that these ads sell for tens of thousands of dollars.
Twitter did not stop there as it went on to launch 'Promoted Accounts'. This was a new advertising format designed to help brands gain more followers by being displayed on Twitter's 'Suggestions for You'. Explaining how it works, the company had said that promoted accounts utilizes algorithms that calculate whether you'd be interested in a specific promoted account before displaying it in the 'Suggestions for You' section.
While Evan Williams' statement asserting that Twitter was doing just fine monetarily came as a surprise, the answer to the question of 'how' seemed to be lodged in his limited remarks itself - the promoted suite. He claimed that the promoted suite was doing extremely well and that the demand was outstripping the supply.
As to future revenue plans, the co-founder said Twitter was considering selling access to its firehose of data. This came in line with the 2009 announcement of deals aimed at incorporating Twitter data into Bing and Google. On finding that the demand was much higher than expected, the company partnered with Gnip to sell portions of the firehose.