Twitter May Be Profitable — No, Seriously!

Team Twitter: Biz Stone, Ev Williams & Jack Dorsey. Photo by Om Malik

We, like so many others, have joked about Twitter’s non-existent business model and its frothy billion-dollar valuation. Apparently we might have to stop that — at least for now. The San Francisco-based micromessaging company is said to be profitable, according to a report in Bloomberg that quotes someone close to the company. The profitability might be shortlived, however, as Twitter continues on path of hyper-growth.

The company is going to bring in revenue of $25 million, thanks to its search deals with Google (s GOOG) and Microsoft (s MSFT). Google is paying the company $15 million a year, while Microsoft is paying it $10 million for access to its real-time data. The company, Bloomberg claims, has operating costs of $20-$25 million a year, which allows it to be slightly profitable for 2009. According to some estimates the company, which has 105 employees, is likely to have revenues of $114-$134 million in 2013, sans profits.

I have to admit, the report came as a bit of a shock. Even if the search deals are rewarding Twitter handsomely, it was safe to assume that the company would still be spending a lot more as it continues to grow its business. In 2010, I won’t be surprised if it spends lavishly on three things:

  • *New management team including several new “C”-suite executives.
  • *Infrastructure to scale their network to accommodate future growth.
  • *Hiring more engineers and other key people as it tries to build out the service.

Which means the so-called profits are going to evaporate and the company will have to dip into its $155 million (VC) cash hoard. Even the soon-to-come commercial accounts might not be enough to make up for all that spending. That said, I think Twitter isn’t charging Google and Microsoft enough for its core product: the status updates. But hey, that’s just me!