Reports of Twitter's profitability appear to be debunked by a statement on its website:
Even though it brought in $25 million last year from data licensing deals with Google and Microsoft (MSFT), these were multiyear deals, which means Twitter is starting from scratch this year.Twitter has many appealing opportunities for generating revenue but we are holding off on implementation for now because we don't want to distract ourselves from the more important work at hand which is to create a compelling service and great user experience for millions of people around the world. While our business model is in a research phase, we spend more money than we make.
The social-media service, which now boasts more than 58 million members, has 26 job openings listed on its website, and four of them include variations on the word "monetization." Those differ from the three business-development positions that are listed. Rather than sales, the company is clearly trying to figure out what it should sell. Until it figures that out, there is little reason for Twitter to invest heavily in a sales force.
Twitter appears to have some ideas in the works already. A number of the job posts say "Twitter is looking for new members of our technical staff to work on cutting edge monetization projects," which implies that there are initiatives in progress. Twitter just needs the talent in place to advance these ideas -- and possibly find new ones -- to the point where it's generating revenue.
There has been no shortage of speculation as to how Twitter will make money in 2010. In September, the company changed its terms of service to allow advertising on its site, but the company hasn't executed based on this new flexibility yet. Twitter COO Dick Costolo told TechCrunch that the company is working on an ad-based model, but wouldn't reveal much more about it. Costolo would only say "We will have an advertising strategy. You will see that from us in the future. It will be fascinating, non-traditional, and people will love it."
Tantalizing Hints About Future in Other Job Postings
Some of the ads for open positions hint that Twitter still plans to pursue licensing opportunities for the data in its "Tweet stream," but the more interesting job postings are for technology positions, as they suggest Twitter hasn't committed to a revenue model yet.
In addition to the four "monetization" positions, an opening for a product manager to focus on "Partner Integration" leads one to infer that Twitter is still looking for ways to expand its reach to other platforms, and deeper into those where relationships already exist. This may also point to an interest in continuing to develop the licensed data revenue stream.
Positions focusing on "User Experience & Design" and search capabilities hint that the company is still trying to draw more traffic to its website and keep users around for a while, which would increase the value of an advertising-based revenue model. Currently, about 70% of end-user interaction with Twitter does not involve a visit to Twitter.com. Every interaction that occurs away from the website could cost the company ad revenue.
Twitter's apparent interest in drawing end-users to its website creates a "coopetition" situation. Much of Twitter's popularity has been fueled by the development of third-party applications, such as HootSuite and UberTwitter, which enable users to tweet independently from the site and with richer functionality than they'd be able to enjoy by texting 40404 from their cell phones. Many of these services are chasing revenue of their own: UberTwitter, for example, serves ads through its Blackberry application. The decision to hire a "Software Engineer -- Platform/APIs" indicates that twitter isn't backing away from these relationships.
And, of course, talk of corporate accounts lingers. In the past, executives have indicated an interest in offering premium services, which would provide more robust analytics and reporting capabilities -- the tools necessary to turn Twitter marketing efforts into measurable investments.
For Twitter, 2010 will be a defining year. If it is able to sort out its business model confusion and make progress toward profitability, it will have the chance to be acquired for a hefty sum or even take itself into the publicly traded domain (though the former does feel more likely). But if it can't turn the corner, its only option will be to sell itself as a source of traffic to an established player, which cuts its value considerably. The new jobs opening show that Twitter is on the prowl for a win, but the outcome will depend heavily on what is produced by the people it hires.