James Perrin

Twitter Raises $800 Million to Pay off Investors and Grow Advertising Business

21st Jul 2011 News, Industry News, Social Media, Social Media, Twitter 2 minutes to read

It’s been a turbulent time at Twitter HQ recently, what with the emergence of Google +, and search engines dropping full integration of their real time updates [See: Search Engine Syndication Woes Continue for Twitter].

With current investors looking for a return on their initial investment, and the microblogging company looking at new ways to monetise from its popularity, Twitter are looking to raise $800 million, pushing its value to $8 billion according to reports.

Its valuation is keeping with the trend of soaring price tags for popular web companies, Facebook, LinkedIn and Groupon to name a few. The difference with these companies though is they’ve either gone public or have intentions to do so.

Twitter on the other hand has no plans for an IPO, meaning that investors have no way of monetising from their stock. That is unless Twitter pays their investors in kind, and to do so they need extra funding.  Not all of the funding is reported to be used like this though. Almost half of the extra cash will be used on product development and as they focus their attentions on growth.

For a company that doesn’t use advertising in quite the same way as Google, it has been difficult for the booming social network to monetise and gain extra revenue. As social search evolves and takes on new twists, it’s important for a company like Twitter to stay in the game. If not, existing sites like Facebook and the emerging Google+ will revel in Twitter’s lack of advertising revenue.

A couple of months ago, the company acquired the advertising company Adgrok, signalling their intentions to compete with Google and Facebook for their lucrative advertising revenues [See: Twitter Distancing Themselves from Third Party Services].

According the Wall Street Journal, Twitter are taking the time make sure they get their business model right. Speaking to the paper, Chief Executive Dick Costolo, who was appointed last autumn, explained he’s been tasked with building an advertising business. He said the company has purposely limited the availability of ad space, “to make sure we get it right.”

It’s important that they do, because they’re missing out on their slice of the advertising pie; Google have only recently published highly envious advertising revenues [See: Despite Spending Big, Google Posts Huge Q2 Profits]. Whilst Twitter may have more realistic goals in mind, it is important for them expand their current services and this latest investment could be just the ticket.

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