Twitter Hauls in Funding, Contemplates Revenue

Twitter has received US$200 million in financing from the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, according to a Wednesday post by Twitter CEO Dick Costolo on the company blog. The funding pegs Twitter’s valuation at $3.7 billion. Clearly, the investors believe Twitter will find an effective way to squeeze substantial revenue from its massive user community.

Twitter also has added two new board members — Flipboard CEO Mike McCue and former Google executive David Rosenblatt.

“The experience these new directors bring to Twitter, along with this renewed investment, will help us continue to grow as a company and business,” Costolo wrote.

Twitter told the E-Commerce Times it had no comment on the new funding beyond what Costolo provided in his blog post.

KPCB Is Buying Twitter’s Growth

KPCB is interested in Twitter’s continuing growth.

“We are privileged and excited to be the lead investor in Twitter’s latest investment round,” KPCB communications team member Ellen Topp told the E-Commerce Times. “As part of the Twitter team, we look forward to helping build the next great Internet treasure.”

In the past 12 months, users have sent 25 billion tweets, Costolo noted, and “added more than 100 million new registered accounts.” To support that growth, Twitter’s staff has grown from 130 people to more than 350 today.

KPCB evidently is not expecting the growth to end soon.

There’s tremendous potential for Twitter to add users, Laura DiDio, principal analyst at ITIC, told the E-Commerce Times.

“Emerging markets are still to come,” she pointed out. “There’s China, Africa, Southeast Asia, Latin America. This takes the notion of connectivity and extends Twitter’s influence into the stratosphere.”

Board Members Will Drive Business

The two new board positions are no doubt part of a strategy to find new paths toward monetizing Twitter’s gigantic following.

“By putting the business people in there, KPCB is buying some insurance,” said DiDio. “Twitter could be a passing fad. I don’t think so, but the next big thing could come along and supplant Twitter the way Facebook supplanted MySpace.”

The new board members will be present to make sure Twitter gets serious about the business of creating revenue.

“If you get $200 million, they get to add two people to the board who have a lot of experience and financial acumen,” said DiDio. “What they’re saying is, ‘Yes we think this is great, but we’re going to put structure to it and make sure it’s monetized to the hilt.'”

How Will Twitter Cash In?

Now that it has the audience, Twitter needs to create a cash register.

“The question everybody asks is how do they make money? Monetizing it has been daunting. They’re selling tweets and influence,” Rob Enderle, principal analyst at the Enderle Group told the E-Commerce Times. “If you go to the site’s trending area, those tweets are promoted tweets. Twitter sells those, and the paid tweets come up higher.”

Companies are using the popularity of the site to promote products and services.

“The top trending item right now is the movie “Fighter.” Clearly they paid to get that visibility,” noted Enderle. “If you do too much of that communication style, though, you lose your audience. A little bit is not bad. Too much is a distraction.”

Even a modest cash flow could deliver decent earnings, though.

“They don’t need a huge amount of revenue to make a little profit — but they’re going to have to grow to avoid competition from a Google or Facebook,” said Enderle. “The question is how to grow it and become fully encompassing, so you can’t be moved over to Google or Facebook.”