JP Morgan follows Goldman Sachs to dive into the social networking territory, as it is in talks of acquiring a 10-percent minority stake in micro-blogging site Twitter.

WSJ reported that the investment will be made from the bank's $1.2 billion digital growth fund. The investment is due to valuation of the site at $4.5 billion. The report also states that JP Morgan has also purchased significant number of Twitter shares available on exchanges for private company stock.

Also the report suggested that JP Morgan fund could also be vying to invest in online gaming firm Zynga Inc., which is currently in talks to raise nearly $500 million from institutional investors.

Twitter raised $200 million in December 2010 in a funding round led by venture capital firm Kleiner Perkins, valuing the company at $3.7 billion. This round of financing brought its total investments to $360 million. In its earlier round of funding in 2009, Twitter raised $100 million from investors T.Rowe Price, Insight Venture Partners and Spark Capital, which valued the company at $1 billion.

Twitter has failed to deliver a business model as lucrative as Google and Facebook. WSJ had earlier reported that Twitter will post $50 million in ad revenue for 2010, a far cry from Facebook's expected revenue of $2 billion for the financial year.

However, Twitter's CEO Dick Costolo in a blog post termed the company's growth as Meaningful Growth. Costolo said the users sent an astounding 25 billion tweets in 2010 and added more than 100 million new users. Also it grew to 350 employees from 135.

Twitter has been in search of a viable revenue model. Reuters reported that Costolo, speaking at the company's Chip Developer conference in San Francisco, said its business model will be based on Promoted Tweets and commercial accounts.

Promoted Tweets will put ads on Twitter primarily in search results and later in user feeds on Twitter and other third-party clients such as TweetDeck and TwitterBerry. Costolo told Reuters that Promoted Tweets are not ads. They will function just like standard tweets, in the sense that people will be able to favorite them and retweet them. Twitter spent a long time coming up with a business model that is 'organic to the platform' and can encompass partners as well as Twitter.

Currently, promoted ads are only visible on searches. Twitter had acquired search.twitter.com in 2008. Recently, Twitter revamped the business end of its website offering forms that companies can use to express their interest in buying Promoted Accounts, Promoted Tweets or Trends. Advertisers were offered 5 categories of monthly ad budgets which included below $10,000 to over $100,000. The estimated campaign time included choices ranging from 1 to 4 weeks to 3 months.

Earlier it was reported that Twitter will allow advertisers to bid for key words on a cost-per-thousand basis. Also, the company is reported to be working on a pricing model called resonance, which measures the impact of tweet by metrics like how much a tweet has been forwarded, marked as favorite and how often a user clicks on the links received. Thus, ads that are able to stay above the resonance score will stay in the circuit while the lower ones will be discarded.

Another step in Promoted Tweets is syndication whereby it will make available the ad system to developers and other clients on a revenue sharing basis.

JP Morgan's plans to buy a minority stake in Twitter follows Goldman Sachs investment of about $500 million in Facebook at a price that valued Facebook at $50 billion.

However, TechCrunch reported that the rumors of JP Morgan investing in Twitter may be baseless as Twitter was able to raise sufficient funds from Kleiner Perkins in December to meet its short term capital needs.

The current report just confirms that even though Twitter is yet to clearly define its business model, it is still seen as a potential goldmine by investors.

Goldman sachs Ma Twitter M&a deals