London: As far back as Nov-ember last year, Digital Sky Technologies (DST) founder Yuri Milner was dropping valley-sized hints about investing in Twitter. Speaking at the Web 2.0 conference in San Francisco, Milner said Twitter was one of 25-30 firms that would fit DST's investment strategy, which is to support international companies in the social internet space with valuations of at least $1 billion (Dh3.67 billion).

At the time, he wouldn't directly comment on whether the two were negotiating a deal but, after months of speculation, Twitter confirmed that DST has invested.

IPO plans

A brief mention in a blog post didn't mention the valuation or the investment amount, but AllThingsD confirmed previous reports that DST invested $800 million at a valuation of $8 billion. $400 million of that investment will be allocated to current investors and employees, who want to see a cash return ahead of an initial public offering that still is likely to be at least 18 months away.

A post on Twitter's blog mentioned that while 150,000 external services connected to Twitter this time last year, that has now risen to more than 1 million services. We assume that means services that use Twitter IDs as a login, as well as full-blown applications, like TweetDeck and those faintly amusing ‘when did I join Twitter?' diversions that require a one-time log in. The post added that Twitter now processes 200 million tweets a day, and employs 600 staff.

DST's investment is hot on the heels of another $200 million last December from Kleiner Perkins Caulfield Byers, Benchmark and Union Square — that valued Twitter at $3.7 billion. By revenue multiples, the DST investment is extremely generous, valuing a firm with estimated annual revenues of only $200 million at $8 billion.

It brings Twitter's total investment to just over $1.16 billion (Dh4.25 billion) in four years.

Milner said at Web 2.0 that 80 per cent of DST's investments are made through secondary markets, such as SecondMarket and SharesPost, which have become increasingly popular for employees of firms like Facebook, for example, who want to release some value from their shares and don't want to wait for the company to float.

Chief executive Dick Costolo has been tightening Twitter's business for several months trying to increase revenues. Initially that meant restricting third party developers so that Twitter could claim control of any potentially revenue-making services, but the service has also been expanding the services that allow brands to formally advertise.

A few days ago, to supplement the existing ‘promoted accounts' and ‘promoted trends', Twitter added ‘promoted tweets' to the mix. Much along the lines of sponsored links in Google search results, promoted accounts charge brands for a premium spot on the ‘who to follow' box, promoted trends put a hashtag at the top of the trends box and promoted tweets put highlighted tweets at or near the top of users' streams.

A recent survey by accounting firm BDO found that 75 per cent of investment bankers think multi-billion tech valuations are over-inflated, while more specialist investors seem to think the scale and commercial foundations of the biggest mobile and social firms is proof enough of viable businesses.