As Twitter’s share price sank to new lows this week, in the aftermath of results which disappointed investors, I recalled an interview that I had done a while back with one of the principal early US investors into the company.

I was talking to him primarily about other issues, but of course, asked about Twitter, which was just beginning to make a wider public impact – in that while it still seemed bizarre, it was not entirely unusual to occasionally see a quote in the news attributed to someone with an explanatory, "said in a tweet".

“But what is it? I still don’t get it,” people regularly told me.

Nonetheless, Twitter was growing exponentially, and like so many social media supernovas, was being criticised for having no obvious revenue model.

I asked the VC about that and he noted that Twitter was an incredible company with enormous scope for monetising users. They were just about to launch the gamechanger, he said – which turned out to be sponsored tweets.

I was sceptical at the time, as I just couldn't see how those would make the company a lot of money. Plus they had the potential of turning off users.

Sponsored tweets
Roll on a few years, and sponsored tweets do clearly generate some income, but that "enormous scope for monetising tweets" remains an aspiration, a promise nobody has successfully converted into cash.

The interview was – to my astonishment – way back in 2010. Four years on, and really, not much seems to have changed, except of course for a major IPO last autumn, which saw Twitter shares launch at $26, only to close just shy of $45, valuing the company at $31 billion. As of Wednesday this week, shares hovered around $32.

And a lot of people still don't get Twitter. As Observer columnist John Naughton noted at the weekend, this is one of the paradoxes of a platform that nonetheless has global name recognition.

"I long ago lost count of the number of people who would come up to me on social occasions saying that they just couldn't see the point of Twitter. Why would anyone be interested in knowing what they had for breakfast?," he writes, noting with some exasperation that this, of course, is not at all what Twitter is "about".

Favourite online service
Like many people, I rank Twitter as my favourite online service, valuable to me both as a personal space and for work. It's where I learn, thanks to all those who take the time to post links to interesting articles or breaking news, and where I socialise. It's where I share some of my own professional and personal interests.

If those things interest other people, then they can follow me on Twitter. If they don’t, they can follow someone else, or just ignore the tweets they dislike.

And they can do all this for free. Which is pretty much at the heart of the problem for so many online services. They’re cool, they’re fun, they’re even a critical part of working life. But I doubt I’d pay for it and as yet, they haven’t figured out a way to make enough money off my participation in their world.

What does all of this say about VCs? Venture capital, like entrepreneurship, is a game of mostly failure marked by (VCs hope) a few major successes, to make each fund raised worthwhile. On its website, the US National Venture Capital Association (NVCA) offers the standard claim that about 40 per cent of VC-backed companies fail.

Some comprehensive research in 2012 by Shikhar Ghosh, a senior lecturer at Harvard Business School, indicated that actually, more like three-quarters of such companies ultimately fail.

Early investors
Early investors like the VC I spoke to, probably won't see their Twitter investment as a failure. If they chose to sell their stake when the insider lock-in ended this week – a period for which some investors and employees have to hold their shares before being allowed to sell – they'll still have made good money.

But many such large investors indicated they weren’t selling their stakes. What does that mean? Does it signal confidence in Twitter’s eventual ability to generate substantial income? Or is it a sign of wishful, bubble thinking?

Maybe it’s simply symptomatic of a business world we no longer really understand. Social media platforms and online companies can scale beyond all belief, servicing a user base as big as a medium-sized country, yet still not have a service for which people will pay, even if they adore it.

We’ll have to wait and see if a business model does eventually emerge for this strange economy.