Bloomberg reports that Twitter has received $100 million in venture capital funding that actually values the social networking site at $1 billion, providing the investors with a 10% stake.

Now how is that possible for a site that isn't even making any money? Indeed, you do wonder whether the investors will lose their shirts.

Some might argue that $1 billion might end up looking pretty cheap as Twitter moves into search and marketing, providing minute-to-minute reads on what people are thinking about, and how they're responding to products and messages. Potentially, Twitter could provide increasingly detailed analysis about what different groups of people are saying and doing. Better still, it could do it industry by industry. But then, that hasn't happened yet.

PC World blogger JR Raphael makes the point that Twitter's market share is slipping which, when you think about it, makes sense. No one can expect a 3000% year on year growth to last forever.

As Dave Jeyes at Tech.blorge says, Twitter's big problem is it's churn rate with 60% of Twitter users refusing to come back a month after using the site. So while Twitter is getting venture capitalists to buy in, there is little prospect of it keeping enough users to make proper revenues.

Jeyes writes: "With a churn rate like that, Twitter is turning off users too fast to provide real value in terms of relationships. With such a tenuous relationship between Twitter and its users, it's hard to imagine the average user paying for a subscription or premium features. The best these investors can hope for is a buyout next year."