Twitter, it appears, is the new black. The international phenomenon of “tweeting”, which has engaged text-happy fingers across the globe and provided a public forum for everyone from your neighbor to Oprah Winfrey to Iranian national leaders, allows users to transmit their thoughts, daily activities, and multimedia content across web lines to “followers” in 140 characters or less. To date, Twitter attracts 54 million visitors a month, and apparently all those tweets are adding up to a whole lot of money.
The free social networking and micro-blogging start-up service, which was created in 2006 by Jack Dorsey, is set to raise about $100 million of new funding that would value the company at around $1 billion. Despite previous claims that they would remain independent, Twitter is said to be nearing a deal with up to seven different investors, including Insight Venture Partners, T. Rowe Price, and current Twitter backers Spark Capital and Institutional Venture Partners.
The company still isn’t generating any real revenue, though various options have been discussed including advertising and premium services for businesses, but after their last round of fund-raising, which left them with a reported $25 million still in the bank, they surely aren’t hurting like some less recession-proof companies. So what’s the deal, so to speak?
All signs seem to point to some good old competition. Facebook, a global social networking website that is operated and privately owned by Facebook, Inc., recently reached 300 million members and Twitter is trying to catch up. Chamath Palihapitiya, a Facebook Vice President, told the technology blog VentureBeat that Twitter was now in “the rearview mirror”, a statement that apparently didn’t sit too well with Twitter executives. Both companies are focused on eventually reaching a billion users around the world, which is nearly the entire population of the Internet.
This may seem like an ambitious goal, but despite the fact that the company has never actually brought in any significant revenue of its own, Twitter still manages to raise an exorbitant amount of money and score an impressive valuation, having quadrupled in value in less than a year. I may not be a business expert, but how often do you hear of a company that is capable of that?