Twitter, the free social networking and micro-blogging site, where users can send and read short messages, or tweets, is raising approximately $50 million in funding that will value the company at $1 billion.

TechCrunch, a blog that profiles startup companies, located just a short walk from Facebook and several other internet start ups in Palo Alto, California, said that Twitter chief executive Evan Williams told employees at a recent meeting that the company would raise around $50 million, although the final amount is yet to be finalised.

Twitter, the privately funded startup founded by Jack Dorsey in 2006, has raised over $57 million from venture capitalists since its inception in March 2006. Twitter was funded initially by Obvious, a creative environment in San Francisco when it was launched publicly in August of 2006.

Although the exact amounts of funding have not been publicly released, the San Francisco, California-based popular tweeting site was rumoured to have raised $2 million in a first-round funding from Austin Ventures.

Twitter's amazing success lured even more investors as the micro-blogging site is reported to be raising $ 35 million in funding from US venture capital firms Benchmark and Institutional Venture Partners in February, valuing the company between $200 million and $250 million.

Twitter had previously raised approximately $20 million in funding.

While Twitter's business model remains a mystery, the company says that its business model is in a research phase and it spends more money than it makes.

The company plans to build Twitter into a successful revenue-generating company, but wants to hold off implementing its business model for now, since it does not want to distract itself from creating a compelling service for millions of people around the world.

Industry experts feel that the company could generate money from e-commerce since it can sell products that its users already use as well run ads alongside its search results like Google.

TechCrunch had published Twitter's internal financial projections after a hacker had gained entry into its computers this year.

These projections estimated that in 2009, Twitter's revenues would be approximately $400,000 in the third quarter and $4 million in the fourth quarter with a user base of 25 million at the end of the year.

The company had projected $1.54 billion in revenue, $111 million in net earnings, and a user base of 1 billion for the end of 2013.

Called the SMS of the internet, Twitter has gained popularity globally and is ranked as one of the 50 most popular websites worldwide by Alexa's web traffic analysis.

As on June, worldwide visitor's to Twitter's Web site reached 44.5 million up 15-fold-year-over-year, according to comScore data.

Twitter was used by both Democratic Party nominee Barack Obama and Republican party candidate Senator John McCain in the 2008 US presidential campaign throughout the race.

California's Governor Arnold Schwarzenegger is an ardent Twitterer and regularly uses the micro-blogging site for communicating with California's voters.

In June 2009, Twitter was used as an effective communication tool with the world when the Iranian government blocked all external communications during the outbreak of countrywide protests at the alleged fraud in the Iranian presidential elections.