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For an upstart Internet company, one couldn't ask for better endorsements than Barack Obama using your service to update his supporters or NASA's Phoenix Mars Lander utilizing your network to declare to the world that it has found evidence of ice on the Red Planet.

That kind of exposure is helping Twitter Inc., a quirky micro-blogging service that has become a staple within the tech community, to attract the attention of mainstream users and investors.

Investors, however, want to know whether Twitter has what it takes to become the next Internet darling capable of an initial public offering, or whether it is simply the latest in a long line of Internet startups that are long on potential but prove short on real-world value.

Venture capitalists, hoping to discover the next social networking phenomenon like MySpace or Facebook, are investing heavily in companies such as Twitter that they believe can translate rapidly expanding user bases into cold, hard advertising dollars.

"Twitter is a really interesting company but I don't think the industry knows what to do with it," said Jennifer Simpson, an Internet communication analyst with market research firm Yankee Group in Boston.

"People don't understand its purpose or utility beyond a novelty."

Co-founded by Google alumnus Biz Stone and his business partner Jack Dorsey, Twitter is a messaging service that asks users to tell their friends what they are doing in 140 characters or less - "micro-blogging." The messages are similar to status updates on a Facebook page. Updates can be made via the Internet or text message and are displayed on a user's Twitter blog. Anyone can choose to follow someone else's Twitter blog and receive the updates on their own page or on their cellphone.

Even though Twitter has yet to generate any serious revenue, the company announced last week that Seattle's Bezos Expeditions - the investment firm of Amazon.com Inc. founder Jeff Bezos - and New York-based venture firm Spark Capital had signed on as investors. Although the size of their combined investment has not been revealed, Internet speculation suggests it could be as much as $15-million (U.S.) for a stake that would put the total value of the company at upward of $100-million.

But because the latest generation of Internet startups - known as Web 2.0 companies - require less capital than traditional tech startups (such as semiconductor makers), investors don't need to put as much money into them and can wait longer for them to mature.

"It's a little different for Twitter," Mr. Stone said. "A lot of startups will put together an idea and then start looking for money, but with Twitter we hit on something that was very popular and grew very quickly before we started looking to take venture capital."

However, Twitter's exploding user base has stretched the firm's resources - users routinely log on only to find the service has crashed or gone offline - while plans to monetize the service remain mired in the conceptual stage.

Although Twitter is beginning to experiment with advertising models, Mr. Stone said the top priority is expanding its infrastructure and building a reliable network.

Because so many Web 2.0 firms rely on ads as their fundamental revenue stream, many have been hit hard by the soft consumer economy. Investors are playing it cool and waiting for the economy to improve to the point where successful tech firms - including Facebook and Twitter - can consider an IPO.

"Twelve months ago would have been a better time to do an IPO than today," said Dan Daviau, investment banker at Genuity Capital Markets. "People were feeling that the consumer market was strong. The public market for IPOs is a very difficult market in the technology arena these days."

Mr. Stone agrees. "I have friends who are doing much smaller startups and who are starting from scratch, and I think for them it's a little bit trickier because venture capitalists are looking for signs of growth or signs of sustainability and I don't think there's as much crazy investing," he said.

"People are just hanging on to that money and only giving it out when it's going to make a lot of sense."