Twitter has just received a fresh infusion of funds from Saudi Prince Alwaleed bin Talal, one of the world's top private investors. With the microblogging service gearing up for a new advertising-based business model, and forecast to earn upwards of US$ 130 million per year, does the company really need this "strategic stake" from the Saudi Prince?
Twitter is getting a US$ 300 million investment from investment holdings company Kingdom Holding. Ahmed Halawani, Kingdom Holding director, says the "strategic holding" -- more than 3% of the company's ownership -- was decided upon after "several months of negotiation." This will increase Twitter's market valuation to more than US$ 10 billion, according to Bloomberg. In its most recent US$ 800 million financing this August led by DST Global, Twitter's market valuation was raised to about US$ 8 billion.
The microblogging service is set to roll out advertising features as its main source of revenue moving forward. EMarketer estimates Twitter's advertising proceeds at US$ 139.5 million for 2011. With the new infusion of funds, however, Twitter is likely to hold off on issuing an IPO for at least two years, as Halawani believes.
The company believes that social networking will change the fundamentals of the media industry. I expect Twitter does not need further funding before going public."
Twitter has confirmed the US$ 300 million investment, although the company has declined to provide further details.
In Good Company
Alwaleed, who owns 95% of Kingdom Holding, is likewise the largest individual investor in Citigroup Inc., and has stakes in Apple, News Corp. and General Motors, which puts Twitter in good, albeit mixed, company in terms of investor funding. However, there is question whether Twitter really needs money at this point, and whether it has actually raised capital. Fortune points out that the deal is "structured as a secondary," in which Kingdom acquired the shares from Twitter insiders. As such, the transaction will require approval from the company, although it will "not actually receive any of the US$ 300 million, as it would in a more traditional investment."
Still, this news is a big boost to Twitter, hot on the heels of releasing its latest redesign, which refocuses the user experience toward connections and discovery through a new tabbed interface. Will the new investment be in line with Twitter's new user experience thrusts and a big push toward being an advertising platform, or is it just icing on the already-sweet cake?