Twitter hits tweenhood

It has 55 million users and no business model. But that's a touchy subject.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Adam Lashinsky, editor at large

Twitter founders Evan Williams (left) and Biz Stone
At what level will the Dow Jones industrial average end 2009?
  • Above 11,000
  • Between 10,000 and 11,000
  • At 10,000
  • Below 10,000

(Fortune Magazine) -- Ask Evan Williams whether Twitter ought to be trying harder to identify ways to make money, and the founder of the short-burst messaging network just laughs.

"It's funny," he says, in a mid-October interview in the young company's warehouse-like offices in a gritty part of San Francisco's South of Market neighborhood. "People think we're back here in the office looking around saying, 'Where is that business model? Is it in the couch cushions?' There's a very logical process we've gone through, and you could say we've set the wrong priorities. But if you look at building long-term value, then generating cash isn't necessarily the highest priority."

This messy matter of moneymaking is polarizing for a company that has in every other possible way far exceeded anyone's expectations. Twitter, the communications platform that launched in 2006, has become more than just a hot tech startup.

It's a cultural sensation, having amassed 55 million unique monthly visitors worldwide and become a fixture of the international zeitgeist, from protesters in Iran to flood victims in the Philippines. Yet it hasn't collected any meaningful revenue, nor is it in any hurry to do so.

Twitter's top executives, Williams and co-founder Biz Stone -- who together hold slot No. 5 on Fortune's 40 Under 40 list -- appear completely unconcerned that three years into its existence Twitter remains a pre-revenue company.

Critics in the tech industry are anywhere from baffled to outraged by this seeming insouciance. Even Google (GOOG, Fortune 500), whose business model wasn't well understood for years, started collecting some cash almost immediately and never raised additional venture capital after a single, $25 million stake in 1999.

Twitter, by contrast, has raised more than $150 million -- most recently a $100 million slug valuing the company at $1 billion -- with nary a hint of what business it thinks it's in.

If Williams and Stone are unrushed, perhaps it's because they know the most about the beast they're trying to tame. According to Williams, it's far more important to build the site well than it is to hit up advertisers or other would-be customers who want access to the presumably lucrative stream of information made up of what Twitterers post in 140 characters or less.

It also helps that Twitter's financial backers exude calm. "I'm way more interested in how we get 100 million or more people using it than how we make money," says venture capitalist Fred Wilson, whose Union Square Ventures was the first VC firm to back Twitter. "It doesn't cost much to operate the business, and we have a pile of cash now that funds the business for a long, long time." Adds another early investor, Ron Conway: "You'd never collect $100 million from people if you didn't think you could monetize. It's understood."

Those challenges make Williams and Stone tech industry tweeners. Having been around the block a few times -- Williams founded early blogging service Blogger and sold it to Google in 2003 -- they are neither fresh-faced college dropouts (though Williams did not, in fact, ever graduate from the University of Nebraska) nor seasoned executives who have run companies the size they expect Twitter to become.

However long it takes to get to 100 million users, Williams seems intent on scale first, profit later. "We are spending our time trying to create the best technology and product for as many users as possible," he says. "That's where all our value is going to come from."

In other words, not from under the couch cushions.  To top of page

Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 9:49pm ET
More Galleries
8 must-have travel apps Whether you've got wanderlust or an airline grievance, here are some apps to pack onto your phone. More
Hot stocks: 10 record breaking companies The S&P 500 is trading at all-time highs, and many well-known businesses are leading the charge. Time to buy or sell? More
My biggest retirement mistake Five CNNMoney readers share stories about saving that you can learn from. What they would do differently if they had another chance. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.