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Twitter said to be profitable after making Internet-search deals

The social-networking site will get about $25 million from agreements with Google and Microsoft, enough to push it into the black for the first time, sources say.

December 22, 2009|Bloomberg News

Twitter Inc. will make about $25 million from Internet-search deals with Google Inc. and Microsoft Corp. announced in October, enough to push the site into profitability, people familiar with the matter said.

A deal that made Twitter's messages searchable on Google's site will generate about $15 million, the sources said, while a similar pact with Microsoft's Bing search engine will earn Twitter about $10 million.

As a result, Twitter is expected to make a small profit in 2009 after paying operating costs of about $20 million to $25 million a year. The San Francisco firm has 105 employees, its website says.

Since its founding in 2006, Twitter has raised about $155 million in venture capital, including a $100-million investment in September that valued the company at $1 billion, according to a person familiar with the deal.

Until this year, Twitter had little revenue, let alone profit. But the company attracted millions of users to its free service, which lets post and read 140-character messages, known as tweets.

Chief Executive Evan Williams said two months ago that the company was focusing on improving the service rather than finding ways to make money.

That left many analysts and investors wondering how Twitter would convert its popularity into earnings. Twitter has more than 58 million monthly users worldwide, according to research firm ComScore Inc.

The company's website is the third-most popular social-networking site in the U.S., after Facebook Inc. and News Corp.'s MySpace.

Twitter co-founder Biz Stone declined to comment on finances, saying only that Twitter was proud of what it accomplished in 2009.

"We're thrilled about the partnerships we've formed this year," Stone said in an e-mail.

Representatives of Google and Microsoft also declined to comment on the value of their deals with Twitter.

The payments from Google and Microsoft underscore the growing value of the data coursing through Twitter's network. Both tech giants have said their search engines would be incomplete if they didn't include the millions of messages posted on Twitter every minute.

"We believe that our search results and user experience will greatly benefit from the inclusion of this up-to-the-minute data," Marissa Mayer, Google's vice president in charge of search products, wrote in a blog post after the deals with Twitter were announced.

Tweets also are a source of product information, with shoppers using Twitter to share views on their purchases. Making that information available on Google and Bing could help the search sites sell more advertising and provide more relevant search results to shoppers.

In addition to the search deals, Twitter has said it will charge for commercial accounts, which would let businesses analyze tweet traffic.

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