I know I made fun of this rumor, but commenting on it in a serious manner... well, a programmer friend and I were discussing this earlier tonight and this is what he said.
First, the software used for Twitter is very, very simple. Any good programmer with database knowledge would be able to write it and maintain it. Wouldn't be hard for a small team of people to run the whole site with all its ~10 million users. He also said the bandwidth costs wouldn't be too incredibly high, maybe a few thousand dollars a month. I'm going based on what he said so maybe he's way off (he's been way off about stuff in the past but he's also very stubborn and I didn't want to argue his facts when I'm far less qualified to speak on the subject).
Essentially, his question was this: If Twitter doesn't advertise or charge for anything, how do they make money? How do they get venture capitalists to sink millions of dollars into them? And my follow-up question was this: If it only takes a small team of programmers and some decent web hosting to maintain a site like Twitter, where do those millions of dollars go? What is the point? They've got 29 people - even with generous salaries, it doesn't cost THAT much to pay all of them.
In the end we agreed that Twitter is going to suffer a similar fate that befell the tech bubble companies of the late 90s. This quote from their FAQ page seems to reinforce that (the question was, "How does Twitter make money?"
Quote:
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Twitter has many appealing opportunities for generating revenue but we are holding off on implementation for now because we don't want to distract ourselves from the more important work at hand which is to create a compelling service and great user experience for millions of people around the world. While our business model is in a research phase, we spend more money than we make.
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