Twitter has millions tweeting in public communication service

SAN FRANCISCO -- It's tea time at Twitter. While that may evoke images of courtly discussion over Earl Grey and finger sandwiches, it's quite another thing at Silicon Valley's new "it" company.

The idea is that any employee can step in front of the 43-person start-up and offer a no-holds-barred weekly critique on a Friday afternoon. Co-founders Evan Williams, Jack Dorsey and Biz Stone often watch from the back, taking mental notes. Some employees recite poems; others make wacky slide presentations. The point is to express what the company means to them.

In another tradition, Alison Sudol, a musician with more than 500,000 followers on Twitter, this month spoke at headquarters, part of a monthly ritual in which artists and academics drop by to impart wisdom and entertain.

Both events underscore the bottom-up culture fostered by Twitter's unassuming co-founders, who have become reluctant media stars. "Tech founders get a little too much emphasis," CEO Evan Williams says. "So many people here contribute to our success."

Today, it seems everyone wants a piece of Twitter. There have been rumors of takeover overtures from Google, Facebook and Apple. Twitter, like Google, has become a verb (though the proper term is "tweet"). Twitter's co-founders have had a profound impact on how millions of people communicate. Yet, despite appearances on Oprah,The View and The Colbert Report, many refer to them as simply The Twitter Guys.

"They've created a new way for people to communicate publicly and instantaneously," says Fred Wilson, a venture capitalist who is on the company's six-member board and an investor.

The trio, all in their 30s, are college dropouts with a modest track record of success. Each helped start a company before Twitter. Dorsey invented the service out of his deep fascination with taxi dispatches and city grids. Williams began reading business books for fun as a teenager. Stone wrote two books on blogging, and is Twitter's de facto public relations department.

They're sitting on a potential gold mine. The 3-year-old firm raised $35 million in February alone — $55 million to date — and was recently valued at about $100 million.

To be sure, behind the feel-good vibes, meteoric growth and nationwide fixation, Twitter's founders face issues of user retention, outages and persistent questions about monetization. Such are the challenges for a highflying start-up trying to live up to its considerable hype in the worst economy in more than 70 years.

Yet, industry leaders such as CEO Tony Hsieh are convinced Twitter is up to the task.

"All three (Twitter founders) have the belief that Twitter can change the world and the passion to make it actually happen," says Hsieh, a Web sales guru and fan of Twitter.

No slam-dunk

Millions of people use Twitter to trade short messages of 140 characters or less — think haiku — via the Web and cellphones. The free service is the fastest-growing major website in the U.S. It had 17 million registered users in the U.S. in April — up 3,000% from a year ago, according to market researcher ComScore.

Celebrities such as Ashton Kutcher (1.5 million followers) and athlete Shaquille O'Neal (950,000) have added to its popularity. CEO Marc Benioff, an occasional adviser, believes the service will lead to new categories on the Web — "from real-time journalism to the next generation of customer service and call centers."

Before it gets there, however, Twitter must navigate several hurdles. Look no further than to Twitter Quitters, the cutesy nickname for users who quit after less than a month. Twitter's retention rate — people who return the next month — is about 40%, Nielsen Online says. Facebook and MySpace have rates of more than 60%.

There also is chronic second-guessing from users and tech analysts about Twitter's occasional outages and what it should do next — particularly, how it will make money in a sagging economy and whether it will be sold. (For the record, Williams says there is "no interest in selling.")

"Twitter must have the most armchair quarterbacks of any start-up in recent memory, except possibly Facebook," says Laura Fitton, a consultant and co-author of Twitter for Dummies.

Twitter experienced second-guessing full bore when it abruptly dropped a feature used by less than 3% of its users that removes some comments. "We screwed up," says Stone, who notes Twitter will soon have a solution. "There is so much going on here, we let it fall through the cracks."

Adds Williams: "We did a poor job of communicating. When you evolve the service, you may upset people in the process. If you stand pat, you risk being stagnant."

The challenges don't end there. Twitter, like its social media peers, must produce revenue. "Eventually, companies like Twitter are going to be forced to choose between huge user numbers or a smaller, truly active network of people willing to pay a nominal fee," says Sayles Braga, CEO of YellowPin, a social-networking service.

Twitter's brain trust has heard it all before. "It took Google four to five years for revenue," says Dorsey, who was just in Iraq to help the government improve communications with citizens. "We will be patient, too."

The usually chatty Stone and circumspect Williams are vague on how Twitter will evolve from hip technology to moneymaker. But Stone allows the company has plans for tools and services by year's end that will help businesses serve customers, and it may charge fees for such services.

"The idea of taking money to run traditional banner ads on has always been low on our list of interesting ways to generate revenue," Stone mused in a blog post last week. "However, facilitating connections between businesses and individuals in meaningful and relevant ways is compelling."

One new effort was announced Monday: an unscripted TV series based on the site that, according to the Associated Press, would "harness Twitter to put players on the trail of celebrities in an interactive, competitive format."

The brain trust

The weight of all of the lofty expectations rests squarely on the slight shoulders of Williams, 37, who oversees daily operations. The Clarks, Neb., native succeeded Dorsey as chief executive in October. He has successfully navigated a start-up before. As co-founder of Blogger, one of the first applications for creating and managing blogs, he helped sell it to Google for an undisclosed amount in 2003.

Following Blogger's sale, Williams was not long for Google. He eventually hooked up with a friend, Noah Glass, to start Odeo, at the time a podcasting company. It was there that the Twitter concept was born.

"Ev is the total package," says Chris Sacca, one of Twitter's first investors and an adviser. "He reminds me so much of (Sacca's former Google bosses and co-founders) Sergey (Brin) and Larry (Page). They understand products and how they can fit in the future."

The son of a now-retired farmer, Williams showed a predilection for commerce as a teenager. He read business books on real estate, marketing and publishing. "I realized I could buy books and learn something that people spent years learning about," says Williams, who dropped out of the University of Nebraska just as the Web was becoming a phenomenon, in 1994.

While Williams bears the operational brunt of running Twitter, the tireless Stone is the marketing hub. On a typical day, he fields 100 media requests.

"Ev is the technology builder, and Biz is the evocative and communicative one," says Reid Hoffman, CEO of LinkedIn, the popular business-networking service.

Their partnership was born of a close working relationship and friendship built after starting out as business competitors. In 2000, Stone co-founded, a website that hosts blogs and social-networking profiles. It "looked a lot like MySpace before MySpace," he says. Its rival was Williams' Blogger.

After Google bought Blogger, Williams asked Stone to join Google to help reboot Blogger with a new design and features. "I didn't really know Evan then," Stone says. "We were just familiar with each others' work. There was a mutual admiration."

By 2005, they left Google for Odeo. Stone's timing could have been better — he gave up his Google stock options because he wasn't there long enough to be vested — but Odeo was where Twitter was born.

"Twitter is so many things: a messaging service; a customer-service tool to reach customers, as proven by Zappos, Comcast and others; real-time search; and microblogging," says Stone, 35.

The least visible co-founder, Dorsey, 32, is rarely around the office and already onto his Next Big Thing. But the St. Louis native is the mastermind behind the notepad sketch in 2000 that led to Twitter. "My whole philosophy is making tech more accessible and human," Dorsey says.

When an image of the sketch was uploaded on the Internet in 2006, Dorsey wrote: "I had an idea to make a more 'live' LiveJournal. Real-time, up-to-date, from the road. Akin to updating your AIM status from wherever you are, and sharing it. …We're calling it twttr."

"Jack's original vision was staggering for its potential, as well as its simplicity," Sacca says.

These days, Dorsey is chairman of the company's board of directors and a strategic adviser, but is devoting his energies to a top-secret start-up. He won't say much about the new venture — only that it involves tech and communications, and that it may make its debut this summer.

In many ways, the boyish-looking Dorsey best captures the spirit and look of Twitter. He bears a forearm-length tattoo that he says represents an F-sharp, an integral symbol from mathematics, and a human clavicle — the only bone, he says, with "free range of motion."

"I'm a very low-level programmer," Dorsey says, chuckling. "This idea of a short, inconsequential burst of activity (Twitter) turned out pretty well."