Twitter raked in $25 million from Micorosft and Google in deals announced in October, according to Business Week‘s Spencer E. Ante The much-hyped agreements to include Twitter’s data in search results cost Microsoft $10 million and Google $15 million, and was enough to make Twitter profitable in 2009, according to Ante’s sources. The leak is well-timed for the IPO rumor mill, and is hard to imagine as coming from anywhere other than the company’s leadership.
This is good news for one of the hottest IPO prospects in 2010, but it’s a bit of a stretch to stamp Twitter profitable until we know how long the “multi-year” agreements are for, and how recurring that revenue might be. Two big one-time checks are not the same as steady income, which may be why the company has been talking up plans for advertising and commercial accounts more than the deals with the search giants. To convince public investors, Twitter has to overcome the perception it’s a case of growth-over-revenue.
The profitability claim is based on operating cost estimates of around $20-$25 million a year. It was able to slash costs this year by renegotiating deals with Telecoms, who are now more eager to incorporate the service, Ante says. The company keeps a slim staff (slightly over 100 if a count on the company’s About Us page is an accurate estimate) by essentially outsourcing new-feature development for nothing to volunteers via its API.
BusinessWeek’s sources are “two people familiar with the company’s finances, who asked to remain anonymous because Twitter’s books are not a matter of public record.” You have to be pretty deep inside a company to look at the books and get details on telecom deals, so this seems to me like an intentional leak, which would suggest positioning for IPO this year. Expect more announcements, official or otherwise, about Twitter’s finances to make headlines in the next few months. Twitter did not immediately respond to a request for comments.
A $100 million Series D round in September of this year that included institutional investor T. Rowe Price and late-stage kingpings valued the company at $1 billion.
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