SAN FRANCISCO -- Twitter Inc. gained more than 100 million registered members this year and approaches the New Year with a fresh investment of $200 million.
Now it must prove it can live up to its newly elevated valuation of $3.7 billion.
So "2011 is the year where they're going to need to increase their user base pretty dramatically and prove to advertisers that Twitter advertising works," said Debra Aho Williamson, an analyst with the online research firm eMarketer Inc. "Right now, the advertising is mostly experimental."
In 2009, Twitter's growth was fueled by members who followed celebrity tweeters like Ashton Kutcher. In 2010, Twitter pushed its role as an important source of news and information, which turns the 140-character message into a new mass-media channel. That could ultimately help the company justify investments.
"Twitter is very much an 'of the moment' information network," said Augie Ray, a social media analyst for Forrester Research Inc.
"When you look at the way Twitter has driven the news cycle over posts about earthquakes in Haiti or weather reports or what Lady Gaga is doing, you get a picture of how important Twitter is beyond the pure numbers of people who access it on a daily basis," he said.
For Twitter, the past year has been marked by change and growth. New CEO Dick Costolo called 2010 "one of the most meaningful years" in the company's history, which may not say much since Twitter was founded in 2007.
Still, during the year, the microblogging service:
-- Promoted Costolo in October from chief operating officer, a move designed to elevate the company's push to develop revenue sources. The former Google executive (and onetime stand-up comic) replaced co-founder Evan Williams, who wanted to focus on developing Twitter itself.
-- Introduced new advertising platforms called Promoted Tweets, Promoted Trends and Promoted Accounts. The company was already making a small profit from licensing access to its Twitter stream to search engines like Google and Microsoft's Bing.
-- Added more than 100 million registered members, to bring the total to 175 million worldwide, with 65 percent living outside the United States. Those members sent more than 25 billion tweets this year.
-- Purchased the company that made Tweetie, a popular third-party Twitter application for the iPhone. That signaled Twitter's move to gain more control over how users accessed the service on mobile devices, and the firm later released official iPad, BlackBerry, Android and Windows 7 apps.
-- Increased its workforce from 130 to more than 350, and that's up from 25 in early 2009.
-- Introduced a major redesign of Twitter.com to make it easier for members to access Web pages, video and other material linked in tweets.
Earlier in December, Twitter capped the year by landing a major round of investment led by renowned Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, which chipped in $150 million. Another $50 million came from previous investors. The new round brought the total the company has raised to about $350 million and raised its valuation to $3.7 billion, up from about $1 billion last year.
The influx of cash ratchets up expectations for Twitter's future.
Outside research shows Twitter is still far less popular than social-networking giant Facebook Inc., which has more than 550 million members worldwide. A recent Pew Internet & American Life Project study found that only 8 percent of adult Internet users in the United States -- equal to about 6 percent of the overall adult population -- use Twitter.
According to new research from Sysomos, a social media analytics firm, the service is less about sharing and more about following.
In analyzing more than 20 million tweets in 2010, Sysomos found 22.5 percent of the members accounted for 90 percent of all activity. And a "small hard-core group" representing 2.2 percent of all members sent 58 percent of all tweets. The vast majority of Twitter members -- 80.6 percent -- generated 500 tweets or fewer.
But "Twitter doesn't have to be a tool for the masses to actually be a mass media," Ray said. "Twitter's future success will depend more on how tweets are consumed rather than the number of people who are tweeting."
The question remains, however, whether Twitter can find ways to leverage that influence to make money.
Promoted Tweets, Promoted Trends and Promoted Accounts rely on advertisers to sponsor messages or topics being spread by the Twitter-verse.
Retail giant Target Corp., for example, sponsored the "BlackFriday" hashtag the day after Thanksgiving, giving those who clicked on "BlackFriday" a tweet about a $25 gift card.
Those can be helpful for "time-sensitive" marketing programs, such as promoting a new movie, but "will the same thing be said for automotive marketing?" Ray said. "We'll have to see how they develop those strategies."
Twitter has lined up about 70 advertisers, but the programs are still in their "early days," spokesman Matt Graves said. "We're not done," he said. "We're just going to keep experimenting constantly to figure out what's working and what we can make better."
(E-mail reporter Benny Evangelista at bevangelista(at)sfchronicle.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)