According to a report by Business Week's Spencer E. Ante, Twitter's search deals with Google and Microsoft made the company about $25 million - enough to turn Twitter into a profitable business in 2009. According to these reports - which Twitter did not comment on - the deal with Google made Twitter about $15 million this year and a similar deal with Microsoft generated about $10 million in revenue.]]>
The idea that Twitter made a profit from these deals is based on the assumption that the company's annual operating costs are roughly $25 million. Twitter, of course, doesn't release any information about its operating costs or the revenue it made from these deals, so we have to take this estimate with a grain of salt.
Bringing Costs Down
Business Week's Ante also argues that Twitter was able to reduce operating expenses by renegotiating its deals with the telecom carriers that support the service's text message system. Until this year, the cost of supporting the SMS system represented Twitter's largest expense, though according to one source quoted by Ante, "now people are the biggest line item."
Generating More Income
Earlier this year, Twitter also announced that it plans to create a revenue-sharing scheme that would allows Twitter to share in the profits generated by third-party applications and vice versa. The details of this plan are still under wraps, however, though at LeWeb, Ryan Sarver, Twitter's director of platform, announced that the company would announce details about this plan early next year.
Chances are that Twitter is still looking into creating revenue from advertising as well. If the company really managed to be profitable based on the search content deals with Microsoft and Google, however, then Twitter will at least have a longer runway before it has to open up this revenue channel, which is likely to alienate quite a few users.
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