Twitter Earns First Profit Selling Search to Google, Microsoft
Posted on December 21, 2009
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In characteristic style, for a start-up founded on the idea of brevity, Twitter attained profitability with with two strokes of the pen, inking deals with Google and Microsoft totaling $25 million allowing those companies to display tweets in their search results, according to a Business Week report.
Twitter investor Fred Wilson of Union Square Ventures called the question of how Twitter would make money “the stupidest question in the world” last year, adding, “it’s like ‘How was Google going to make money?’”
Apparently, Twitter plans to make money, in part, by getting it from Google.
Twitter sold Google and Microsoft access to people’s tweets and the right to post them in search results so that they can datamine and put ads around them. Those tweets are and have always been publicly viewable (one reason Facebook recently changed its default for status updates to “public”). Still, some users may not expect their tweets to show up on Google and Bing next to ads relating to their contents.
On the upside, Google and Bing users will be able to tap into Twitter’s collective conscious by searching and tracking trends as they’re made as a new way to keep up with trivial and non-trivial events. On the downside, for some, they could amplify regrettable, hastily-written tweets well beyond one’s circle of followers.
Twitter’s deals with Microsoft and Google were worth more than had been previously estimated — approximately $15 and $10 million respectively against $20 to $25 million in annual costs, according to Business Week’s sources, who asked to remain anonymous because Twitter is a privately held company. One of the sources referred to Twitter’s hundred or so employees are referred as a “line item,” indicating that he or she is likely an investor with knowledge of the deals. (In addition to Union Square Ventures, investors including Spark Capital, Benchmark Capital and Institutional Venture Partners, who have pumped $155 million into the company since 2006.)
In addition to selling Google and Microsoft the ability to search and display people’s tweets, Twitter also gained profitability by streamlining costs by renegotiating text-messaging fees paid to telecom companies as its negotiating position apparently grew stronger due to its popularity and that of cellphones that can tweet without texting.
Twitter also plans to inject advertisements into its own service next year as part of its expansion, according to COO Dick Costolo, who was apparently instrumental in putting together the Google and Microsoft deals. Twitter wants to integrate ads without alienating users, which could be a tricky proposition, especially since its API allows outside developers to build apps that lets people use Twitter without ever going to the site.
Bing already searches Twitter and displays trends from the service at bing.com/twitter, and Microsoft plans to integrate it into other aspects of search. Google hasn’t launched its Twitter search feature yet, but its vice president of search products and user experience Marissa Mayer said it would happen in the coming months.
Original post by Eliot Van Buskirk
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