December 19, 2011, 11:37 AM — Saudi investor Prince Alwaleed bin Talal has invested $300 million in microblogging service Twitter, according to Alwaleed's investment company, Kingdom Holding.
The money comes at a critical time for Twitter, which is under increasing pressure to prove it can build a viable business model on the backs of its more than 100 million users.
That model will be based on advertising revenue, but there are inherent risks in Twitter injecting too many advertisements in the tweet-stream, which is already polluted with marketing pitches and corporate propaganda.
A lot of people who joined Twitter to share and communicate ideas could be turned off by the commercial noise and might dump the service for a competitor. This threat, in my opinion, is the biggest obstacle to Twitter's Facebook-like aspirations.
Beyond the uncertainty regarding its business model, the San Francisco-based company also is undergoing heavy turnover in the top ranks, which comes just months after co-founder Jack Dorsey returned last March to run product development under new CEO Dick Costolo.
The staff changes can be read in a positive or negative way. Those who argue that it's a good thing see the exodus as needed and overdue, a necessity if Twitter is to graduate as a company beyond the "cool tool" stage.
But if talent is leaving because 1) they've given up for one reason or another, or 2) they're being forced out simply because they're the "old guard," that just adds to the questions surrounding Twitter.
Despite the doubts, the Alwaleed investment values Twitter at anywhere from $8.4 billion (according to analysts two months ago) to $10 billion, according to fund manager Jack Neele of Robeco Groep NV.
Based on those numbers, the Saudi prince now has a 3% to 3.5% stake in Twitter. It's a small stake in a company that, if not high-risk, is far from a sure thing.
But worry not for the prince, reportedly the Arab world's most deep-pocketed investor, as he's not exactly betting his kingdom on the microblogging service. That $300 million represents 1.4% of Alwaleed's reported total wealth of $21 billion.
Russia-based venture firm Digital Sky Technologies invested $800 million in Twitter back in August.