Twitter on Friday closed a deal for “significant” new financing for the wildly popular microblogging service, despite having yet to show how it is going to make money.
“We closed a significant round of funding with a group of investment firms,” Twitter co-founder Evan Williams said in a blog post. “Twitter’s journey has just begun and we are committed to building the best product, technology, and company possible.”
The investors were listed as Insight Venture Partners, T. Rowe Price, Institutional Venture Partners, Spark Capital and Benchmark Capital.
Williams did not disclose the amount involved in the financing, but the Wall Street Journal and New York Times have put the figure at up to US$100 million and said it valued Twitter at US$1 billion.
The US$100 million investment is Twitter’s third and largest round of funding.
Twitter’s billion-dollar valuation is “wishful thinking” given that the microblogging service is grappling with how to make money, according to analyst Rob Enderle of Enderle Group in Silicon Valley.
The huge infusion of cash could distract Twitter from its goal of becoming profitable, Enderle said.
“It wasn’t as though Twitter needed to expand or be more visible,” Enderle said. “Twitter needs to discover revenue, and this cash takes the pressure off them to do that.”
Twitter, which allows users to pepper one another with messages of 140 characters or less, has grown rapidly in popularity since it was launched in August 2006 but has been unable so far to generate revenue.
The San Francisco-based Internet firm claims to have topped 50 million users.
Tracking firm Hitwise said on Friday that the number of visits to Twitter’s website and Internet searches related to the firm indicate that Twitter’s meteoric growth has stalled.
“As we can see in both visits and searches, Twitter appears to have hit a resistance point as of April 2009,” Hitwise said in a release. “You can see the drop-off of new users.”
Hitwise said it was unclear whether the figures indicate a temporary setback or that people are “Twittered out.”
The loyalty of Twitter users is “relatively low” based on retention numbers, Enderle said.
Social-networking king Facebook, which boasts 300 million members, has been incorporating Twitter-like real-time comment sharing features, and Twitter applications can be added to Facebook pages.
“Facebook is trying to encompass the technology; all my tweets drop right into Facebook and much of the dialogue that occurs happens in Facebook, not Twitter,” Enderle said. “If something is redundant, you will probably get rid of Twitter, not Facebook.”
Earlier this month, Twitter changed its terms to potentially open up the free service to advertisers.
“In the Terms, we leave the door open for advertising,” Twitter co-founder Biz Stone said in a blog post about two weeks ago.
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