Twitter: Buzz first, profits later

    The "Web toy" is hot. Who cares how Twitter will make money?

    By Adam Lashinsky

    Last summer, well after Twitter had become the buzz of the New York and San Francisco Web crowds but months before its current moment at the apogee of Internet hype, I visited the startup at its hip South of Market offices and wrote a feature on the company in Fortune. Its title, "The true meaning of Twitter," now feels like a quaint moment in time when the very definition of the company's name, let alone how you use its product, needed explaining. Twitter had raised $22 million back then, had about 3 million users and was hot.

    Today it has collected a total of $57 million, has 8 million users and is a veritable supernova. Then, as now, it wasn't making money, which then as now was a favorite topic of conversation among (often envious) people who care deeply about such things.

    Today it's hard to ignore Twitter. New York Magazine wrote favorably about the young company recently. Co-founder Biz Stone appeared on Stephen Colbert's show last week. The super-smart site (and Fortune partner) breakingviews.com analyzed the company's prospects in an insightful feature on Monday.

    Last summer it was cool that the L.A. Fire Department was Twittering to track emergencies -- today it's cool that Shaquille O'Neal can tweet so much about so little.

    Of all the things I heard last summer as I was trying to absorb the latest newfangled Web toy, two comments from Twitter's founders stand out. The first was from Evan Williams, the founder of Blogger (which he sold to Google) and Twitter's largest shareholder. Williams is a quiet guy with a mischievous twinkle in his eyes.

    He likes to play up his Midwestern farm-boy roots, but he's also adept at working the room at tech-industry events and in his quiet way he gives off a vibe of authority. As we were standing to the side of a birthday celebration for one of Twitter's employees, Williams, who goes by the nickname (and Twitter handle) Ev, told me, "We think this thing is going to be really, really big."

    He didn't really elaborate, but as we talked I realized he was serious, and not merely in the way that every entrepreneur thinks they're current project will be huge.

    He was convinced that Twitter was riding a new wave, similar to the blogging wave he'd helped create but from a more defensible perspective. For whatever reason, his confidence was believable.

    The other comment came during my interview with Jack Dorsey, then Twitter's CEO. Williams deposed Dorsey as CEO a few months ago, presumably because Dorsey doesn't have the business chops to run what eventually will be a big company. Dorsey repeatedly told me that Twitter admired Google, especially the way Google patiently built and tested its early product with nearly willful disregard for its commercial success.

    Again, every entrepreneur says they emulate Google these days, but in Dorsey's case, it was believable. At the time, Twitter's service was constantly crashing, and Dorsey seemed curiously unconcerned.

    Maybe that's one reason he later got the boot, but it also suggested to me that Twitter really was focusing on building something its users would want to use, which is one of Google's two cardinal achievements. (The other is the addition of an advertising system to match its superior search engine.)

    Then there's the issue of making money. Twitter has been reluctant to talk about how it will cash in, which seems to get people who have nothing better to do really worked up.

    The latest thought, and a cool one, is that Twitter's search engine -- an acquisition it made last summer of a company called Summize -- will be the key to what's called real-time search. Searching Twitter tells you what people are talking about now, as opposed to the old stuff on news sites or blogs. Advertisers theoretically might find that interesting. There are plenty of other ideas. I know an investor in Twitter -- and there are many of them -- who keeps a list of potential monetization ideas.

    When will Twitter show its hand? I suppose when it's good and ready, but probably when it decides some requisite number of people are hooked on its quirky service. Could it be that Twitter will sell out to Google before it tries to make money, as has recently been rumored? Why not? Google has its YouTube experience of trying, often in vain, to make money off of somebody else's popular but revenueless idea.

    Not every popular service gushes cash, of course, just because it's popular. Witness AOL's instant messaging service. But if Twitter remains independent it will have to make money to provide a return to its investors. Perhaps the best time to knock Twitter for not making money is after it starts trying.