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Content-Search Deals Make Twitter Profitable

Posted by Internet Guru
December 21, 2009

Data-mining deals signed in October will bring in $25 million in exchange for rendering Twitter’s tweets searchable on Google and Microsoft Bing

Twitter is ending 2009 on a high note. The microblogging site has reached profitability after inking $25 million of deals that make its content searchable by Google (GOOG) and Microsoft (MSFT), Bloomberg BusinessWeek has learned.

In October, Twitter said it had struck multiyear arrangements that make users’ short blog postings available on Google.com and on Bing, which is run by Microsoft. Those agreements carry sufficient value to help Twitter achieve a small profit for 2009, say two people familiar with the company’s finances, who asked to remain anonymous because Twitter’s books are not a matter of public record.

Like many social media startups, three-year-old Twitter focused early on adding subscribers rather than generating revenue. That’s left many analysts and investors wondering how and whether the company—often cited as a candidate for an initial public offering or acquisition—would make money. Twitter co-founder Biz Stone declined to comment on the company’s finances, but wrote in an e-mail that the company is proud of the work it accomplished in 2009. “We’re thrilled about the partnerships we’ve formed this year and we’re looking forward to opening Twitter even more

in the future,” Stone wrote.

In exchange for making short blogs, known as tweets, searchable on Google, Twitter will receive about $15 million, the two people say, adding that the Microsoft partnership is worth about $10 million. “The deals were huge,” says one. “With two scoops of the pen, a lot of revenue came in.”

Telecom expenses slashed, too

Representatives of Microsoft and Google declined to comment. When the arrangements were announced, none of the companies involved disclosed their value. Tech blogs, including AllThingsDigital, had said only that the deals were worth several million dollars apiece.

Twitter also achieved profitability by reducing expenses, the people say. The company used to pay a lot of money to telecommunications companies for distributing billions of text messages over wireless networks. Twitter users can send and receive messages over both its Web service and text messages. Now that Twitter has become so popular, it has gained bargaining power with telecom companies and has managed to renegotiate so many deals with carriers that the company pays far less for the services. “Those used to be the biggest line item,” says one source. “Generally speaking, those costs have gone away. Now people are the biggest line item.”

source: businessweek

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