Twitter Inc.'s been spinning quite a turnaround story in the press lately. The microblogging service "has finally turned a corner," declares the cover of Bloomberg Businessweek. "It's a juggernaut," a company executive tells the magazine. But the hard numbers we've been provided paint a very different story.

A source with close knowledge of Twitter's financials leaked us revenue, profit, and other figures from the company's recent past. They are not encouraging.

It's notoriously hard to build a profitable tech startup, even in these bubble times. But Twitter, the business, has been provided a huge leg up by Twitter, the technology platform. It counts somewhere north of 100 million global active users. But more than the numbers, it's the quality of users that should have the company raking in ad dollars.

Twitter is provided a huge quantity of free celebrity content that sites like the hugely profitable Facebook would kill for, from the presidents of the United States and Russia to top film and TV stars like Tom Hanks, Steve Martin, Oprah Winfrey, and Ashton Kutcher, all the way down to gossip magnets like Lindsay Lohan and Kim Kardashian. It has also raised an insane amount of cash, with net inflows of around $760 million. The company, now six years old, has had plenty of time to experiment with extracting gold from its enviable mine of content.

But for years and years, Twitter has failed to do so.

Ongoing Losses

To collect total revenue of $28.5 million in 2010, for example, the company had to spend and write off more than three times that, leading to a net loss of $67.8 million, according to new financial data on the company provided by our source.

And 2011 hardly got off to a more promising start: Twitter posted a net loss of $25.8 million on revenue of $23.8 million through April 30, according to the same source. In that same period, Facebook took in 26 times as much revenue, converting nearly a third of it into profit — and that was only through the end of March.

Since then, Twitter's spending has only grown. Headcount, for example, doubled from around 450 in mid 2011 — per our source — to nearly 900.

Twitter declined to comment on any of the figures in this post.

Those new numbers add a depressing chapter to Twitter's history as the biggest blown business opportunity in media or tech. In previously-leaked Feb. 2009 financials, the company estimated it would take in zero revenue for its first two financial quarters of the year, a strong indication it had been operating without any business plan for the previous three years. For 2010, the company was hoping to draw in $140 million in sales, about five times what it ended up taking in. (At the time they leaked, Twitter called the numbers, originally obtained by a hacker, "not polished or ready for prime time.")

The New Spin

So how is Twitter now posturing as healthy in the press? It's touting its corporate culture, for starters. After having three CEOs in just three years, Twitter has managed to hold on to current chief Dick Costolo for 17 months. "We're trying to build a lasting company," the CEO told Businessweek. Costolo and his lieutenants also listed for the magazine a series of corporate team building exercises they've convened, including a six-hour leadership course for executives, visiting 140 Chief Marketing Officers in 140 days, and creating a list of 10 company principles, like "grow our business in a way that makes us proud." Typical corporate dross, in other words.

Company executives have been stingy with meaningful performance metrics. Twitter told Businessweek's Brad Stone it has an "engagement rate" (ratio of people who click on ads after seeing them) of 3-5 percent, versus 0.5 percent for typical banner ads.

What about profit or revenue? The only such figure Businessweek cited was a 2012 revenue estimate of $260 million from the consultancy eMarketer, nearly 10 times what the company took in during 2010. Twitter said it never vetted that number. "We don't comment on our finances, on or off the record, or on background," a company spokesman said when asked about the article. "So, no guidance [to Businessweek regarding] eMarketer."

Stone declined to comment.

The Uncomfortable Truth

So here's a less sunny version of the financial scenario Businessweek presented:

Twitter's business has been a joke, will have to be rebuilt from the ground up, and as far as we know is still in terrible shape.

Seven months into his term as CEO, and 20 months after joining the company as chief operating officer, Costolo was still spending or writing off two dollars for every dollar of revenue, and there is no hard evidence that Twitter's fortunes have improved in the 10 months since. In fact, the company should be doing worse, if you judge from its disclosure that its worker base has doubled to 900 people inside of a year.

Things may not be as dire as history would suggest. Twitter's gung-ho product VP Satya Patel told Businessweek that 2011 "was the year we began scaling… our ad business… And 2012 is the year when we demonstrate it's a juggernaut." The best is yet to come, in other words. Which is approximately what Costolo was saying when he began his first year as CEO back in Oct. 2010: "We're ready to accomplish more in the next two years than we've accomplished in the last four," he wrote.

Twitter's top dog has eight months left to make that prediction come true. He may yet. Top tech investors are certainly betting on it; in August, they poured $400 million into Twitter at a valuation of $8.4 billion, and bought existing shares for another $400 million, in what was reportedly the largest venture investment round in history. This was soon followed by a $300 million purchase of Twitter shares by a different investor. So the company would seem to have plenty of runway. With that kind of cash in the bank, upping revenue isn't a life or death proposition.

And Twitter has huge advantages. There's the big user base. There's Twitter's role in enabling high-profile protest movements. There's all the free celebrity content. There's the fact that no viable direct competitor has emerged in the past six years. There's also the fact that the service has convinced the vast majority of its users to share their thoughts, interests, and relationships publicly, a highly exploitable level of visibility that has even Facebook envious.

Any tech startup would envy those assets. Any media company, would, too. Twitter only got around to opening a New York office to serve Gotham's big advertising community this past October. Meanwhile, traditional media firms have spent years desperately trying to remake themselves for tech platforms and to wring the last dollars out of their old businesses. Newspapers, magazines, and makers of books,music, movies, and television — all have had to struggle to right the ship after having their business models upended by the digital media revolution.

In the big scheme of things, Twitter's laughable first five years of financial performance might just be an entertainingly weak introduction to a decades-long saga of epic riches, fame, and glory. But they will retain enduring value to disadvantaged entrepreneurs the world over, teaching that while free money, loads of powerful friends, and legions of hangers-on are nice to have and hard not to want, all those things do not add up to a real or sustainable business.

Twitter By The Numbers

Jan. 2011 – Apr. 2011

Revenue: $23.8 million

Cost of revenue: $18.7 million
R&D cost: $13.1 million
Sales and marketing cost: $5.4 million
General administrative cost: $12.0 million
Total costs and expenses: $49.2 million

Loss from operations: $25.4 million
Loss from interest and other: $404,000

Net loss (non GAAP): ($25.8 million)

Jan. 2010 – Dec. 2010

Revenue: $28.5 million
Net loss: ($67.8 million)
Assets: $221.5 million (as of Dec. 2010)
Liabilities: $221.5 million (as of Dec. 2010)


Greater than 5 percent, as of mid 2011:

Benchmark Capital Partners V.I., LP
Institutional Associates Fund, LLC
Institutional Venture Partners XII, LP
Jack Dorsey, Trustee of Jack Dorsey Revocable Trust (under agreement dated Dec. 8, 2010)
Obvious LLC
Spark Capital II LP
Union Square Ventures 2004 LP

[Source: All figures via a source with knowledge of Twitter's finances.]

Correction: The eMarketer estimate of Twitter's revenue was for 2012. We originally said it was an estimate for 2011.

Illustration by Jim Cooke.