What Could Twitter Do with $200 Million? Five Ideas

Twitter now has $200 million to burn a hole in its pocket. What's the best way to put these new riches to work?

Twitter just picked up another $200 million in outside funding, and the $4 billion valuation is no longer rumored – and it’s actually $3.7 billion (but who’s counting, right?). In addition to the influx of capital, Twitter has also picked up two new board members, one of whom has some experience in the big leagues. It looks like things are going to get interesting for the social media platform in 2011.

The latest financing round was led by Kleiner Perkins and included Union Square Ventures, Benchmark Capital, Spark Capital and others. It brings the total raised by Twitter to an astounding $360 million in the past half-decade. Kleiner’s John Doerr was said to be looking hard for an inroad and was “pushing hard to fund Twitter, beating out Russia’s DST Global,” according to Kara Swisher of AllThingsD. DST has a major stake in Facebook.

So, what could Twitter do with this cash? Well, the sky’s the limit, it seems. When Twitter received its last infusion, word got out that they sat on most of the $100 million for a long time … and that was only a little over a year ago. Then, in 2010, the company added headcount, products and revenue streams aggressively. At this point, Twitter does not resemble the company it was a year ago, called by Alex Salkever of DailyFinance a “glorified SMS service, plain and simple.”

Now, Twitter’s pulled in twice the cash it raised in its last round and has a robust new platform to push out into the world. The company should be focused on investing the $200 million in strategies that will take it to the next level – i.e., some sort of liquidity event. So, Twitter, if you’re watching, here’s what I would do:

1. Infrastructure: Twitter has gotten a lot better over the past year; at least I haven’t been seeing the “fail whale” nearly as much. But, this doesn’t mean that Twitter can kick back when it comes to the technology that keeps it moving. There are still too many hiccups, and that simply has to change.

2. Analytics: a quick look at Twitter’s new “Start Advertising” page on its revamped business section shows that analytics are available for advertisers. For the most part, the dashboard shown on the page doesn’t give you much more than you could patch together with the likes of HootSuite or Topsy and Google Analytics (as long as you’re linking back to your own web properties). The “Timeline Activity,” though, looks to be more robust. Analytics has always been the missing link for business users, and I suspect it’s safe to assume that whatever Twitter has isn’t enough. This is the key to corporate use – whether for advertisers or otherwise.

3. Self-Service: it looks like Twitter is in the early stages of this, and it needs to go the rest of the way. Advertising self-service opens the door to large numbers of small clients who wouldn’t be worth the Twitter sales force’s time under the traditional people-intensive sales model. This is a great way to make small pennies add up to big dollars quickly.

4. Acquisitions: Twitter has done a bit of buying this year, and it needs to do more. Instead of developing its own solutions to compete with its application ecosystem (such as smartphone apps and analytical capabilities), the company should accelerate its new feature growth through acquisitions and redeploy its focus to net new capabilities that will advance the company in the marketplace (e.g., adding rich media to the tweet stream).

5. Preparation: if Twitter can get its revenue act together, even if it doesn’t attain profitability, it is likely to become a much more attractive takeover target. The company should really start to position itself for some sort of liquidity event, and the consensus among Twitter-watchers (prudently) appears to be acquisition rather than IPO. Twitter needs to identify any gaps in its service offering and fill them to look its best to a potential suitor at an absurd valuation.