Can the Blue Bird Fly Over the Rainbow?

Twitter is closing in on an $800 million funding deal, $400 million of which will be used to cash out current investors and employees.

Aside from additional revenue, the move will allow current stakeholders to monetize privately held common stock, as the company will probably not file for an IPO in the immediate future.

“Once the latest investments are complete, Twitter’s total cash haul since it was founded five years ago will be $760 million,” according to AllThingsD.

Current investors Benchmark Capital, Union Square Ventures, Spark Capital, and other venture capitalists will be joined, going forward, by Russian heavyweight DST Global, an investor in Facebook, Zynga and Groupon.

This latest funding will bring more pressure on CEO Dick Costolo to monetize the micro-blogging service as management continues to wrestle with a business model.

Costolo wants Twitter to be “the world in your pocket,” the engine of mobile and real-time commerce according to recent comments at Fortune’s Brainstorm Tech Conference.

While many are focused on the recent departures of co-founders Evan Williams and Biz Stone, Costolo is focused on building his senior management team and working with co-founder Jack Dorsey (who's maintaining his role as CEO of mobile-payment company Square) who “speaks with the fluency of the inventor of the product.”

Costolo sees Twitter as “offering simplicity in a world of complexity,” and a lucrative future involving “promoted tweets” and “promoted trends.”

The site's path to 200 million registered users, now sending one billion tweets every five days, has been exciting. But now, of course, it needs to hone its business model if it wants to sustain that growth. "Along any axis you measure us, we're growing faster than we've ever grown before," said Costolo, adding that "the beauty of the Twitter advertising platform is the ads are just tweets. The ad system is organic to the platform,” which affords advertisers the ability "to edit and manage a campaign in real time and distribute it globally.”

"Our engagement rates are through the roof, ads with click-through rates of 30, 40, 50 per cent," he said, and with 80% of advertisers renewing their campaigns, advertising will be "one of the major revenue components for Twitter going forward…there is a commerce opportunity there for us to take advantage of,” he continued.

Meanwhile, when the news broke last night that Twitter had fired four product employees, naming only two, Kevin Cheng and Josh Elman, in a move led by Dorsey, TechCrunch called it “a final measure to remove those still closely affiliated with the old Evan Williams, Biz Stone, and Jason Goldman regime.”

Tech maven Robert Scoble was quick to fuel the fires, posting (on Google+), "we're getting a small glimpse into the mess inside Twitter and it's not smelling very good."

Scoble cited four issues facing Twitter's management and brand perception:

“1. There's very little curiosity inside the product team at Twitter…most don't follow many people, most don't tweet very often, most don't interact with other people very often. There is also a decided bent against heavy users, which is biasing that team toward inaction rather than anything interesting.

2. Until Jack came back engineers were being held back from shipping new features.

3. Consistent feedback that bad hires had been done in the move to rapidly expand.

4. Partners are complaining that Twitter doesn't know what it wants to be and doesn't have a consistent story of how it wants to proceed with partnerships.”

Costolo believes his company is “one of the most powerful brands in the world already in its short life — the bird is recognised around the world — but we don't really have anybody internally curating that brand.”

As Google+ threatens to eat its tweets, Twitter clearly (badly) needs a smart branding strategy and growth plan, if it wants that cute bluebird to fly from real-time, micro-blogging network to a soaring real-time, global commerce platform and vibrant hub.