Micro-Blogging Site Has 32 Million Users but Hasn’t Built Revenue Model or Management Team

By JESSICA E. VASCELLARO, The Wall Street Journal, March 26, 2009

Twitter Inc. is confronting a slew of challenges — from hiring, to keeping its service up and running, to finding meaningful revenue — as the micro-blogging service deals with sudden stratospheric growth.

Even as Twitter’s users have jumped to an estimated 32.1 million from 1.6 million a year ago, the San Francisco company has just 45 employees, up from around 21 in January, and it has brought on only a handful of people with sales or business experience.

Most of Twitter’s employees have had to focus on maintaining the service, which allows people to post and read short, personal updates. As such, the company has had to make trade-offs between managing growth and product features.

The biggest issues facing founders Evan Williams and Biz Stone are bringing on new staff to get ahead of its user growth while working out a business model. Twitter is free and the company doesn’t sell advertising.

“Twitter has no current revenue stream to balance the costs,” says Gartner Inc. research analyst Allen Weiner.

In an interview Friday, Mr. Williams, Twitter’s chief executive, acknowledged that the start-up’s small size, coupled with its rapid growth, has been constraining. “For the entire [three-year] history of the company, most of the resources have gone to managing growth and that is still the case,” he says, adding that Twitter could be around 90 employees by the end of 2009. “If it weren’t growing nearly as fast, we would be building a lot more things.”

Mr. Williams, 37 years old, and Mr. Stone, 35, say they don’t feel any external pressure to change their approach. Instead, they want to develop the company slowly in order to find people who fit with its culture, which they are working to define through rituals such as family-style lunches and weekly “teas,” or happy hours.

Still, Mr. Williams, who sold online blogging company Blogger to Google Inc. in 2003, acknowledged he’s in uncharted territory. “I’ve started a bunch of companies but never run one of this size,” he says.

Meanwhile, Twitter is facing pressure to prove it has staying power, as a good number of users lose interest in the service after trying it for a while.

The management and direction of Twitter will likely be major themes on Tuesday, when Messrs. Williams and Stone will be interviewed on stage at D: All Things Digital, a technology conference in Carlsbad, Calif., run by The Wall Street Journal.

Twitter has gotten more serious about revenue and partnership opportunities. Last year, it hired a director of mobile business development and began sifting through partnership requests. Google Inc. and Microsoft Corp. are buzzing around trying to pitch Twitter on potential search or search advertising partnerships, according to people familiar with the matter.

Speculation continues as to the company being sold. Twitter raised $35 million from venture capitalists in February, on top of about $20 million previously raised. That month, Twitter received a $255 million valuation that makes it unlikely the company would sell for anything less than $1 billion, people familiar with the matter say.

Early this year, Messrs. Williams and Stone also began interviewing a few candidates with business experience for potential business strategy jobs, according to people familiar with the matter. The duo turned down most of them.

Twitter will need more “business-type folks eventually,” says Mr. Williams, but those are the “parts of the business that we haven’t fleshed out yet.”

Twitter’s plans for the near future include a new homepage, says Mr. Stone. Today Twitter.com is geared toward showing people how to post a Tweet, he said, but in the future, Twitter wants it to highlight how the service can help people discover what is going on around them, says Mr. Stone.

“In the long-run, we need to make Twitter the product more relevant to more people,” he says.