Twitter Raises $200 Million In Venture Capital

Microblogging site Twitter has raised $200 million in a funding round led by venture capital firm Kleiner Perkins, valuing the company at $3.7 billion.

This round of financing brings its total investments to $360 million. All Things D also reported that the company added two new board members Flipboard's Mike McCue and DoubleClick's David Rosenblatt.

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 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 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.

Commerical accounts allow businesses to pay for a specific Twitter account. Twitter also provides analytics and lets other users post on that specific account. Last month Twitter entered into partnership with social data streaming service company Gnip.

Under the deal, Gnip will offer messages to Twitter for $300,000 per year, ReadWriteWeb reported. But, the arrangement limits buyers' information to only analyze the messages and not display them. However, Twitter is taking its time deciding how it can use the huge trove of its users' personal data as it does not want to get embroiled in privacy issues which are dogging Facebook and Google.

There are other options available like the DellOutlet that streams tweets offering deals, possibilities that Twitter can cash on. Now that Twitter runs into its third year of operations and investors are pumping in money, they will put pressure on it to book returns.