Twitter has roundly been anointed as tech’s next big thing. Like Facebook, text messaging, blogging, and email before it, Twitter is a clever way for people to communicate and express themselves. In this high-definition multimedia age, the key to Twitter is minimalism. A tweet, as a post on Twitter is called, can be no more than 140 characters. That way, it can go out as a text message to the cell phones of all your Twitter friends. You can also follow tweets on the Web or by email.

Twitter took off in 2008, racing past 5 million users. The Obama campaign used it to keep in touch with supporters. Starbucks, Nike, and other companies have been testing ways to market via Twitter. Even Shaquille O’Neal sends regular tweets to his fans. (Yes, a hulking 7-foot-1 man can be found doing something called twittering.)

The company got its start in 2006 as a side project within Odeo, a podcasting startup founded by Evan Williams, who had previously created the blog-hosting site Blogger. Williams and two colleagues, Jack Dorsey and Biz Stone, nursed Twitter inside Odeo and then broke it out as an independent company. But all is not easy for Twitter. The site has baffled newcomers, angered users with outages, and suffered its first virus attack last year. Then, in January, a hacker hijacked 33 celebrity accounts—including those of Barack Obama and Britney Spears—and wrote fake posts in their names. Williams expects internet power players like Microsoft to attack Twitter with copycat services. And the company still hasn’t found a way to actually make money.

Condé Nast Portfolio contributing editor Kevin Maney interviewed Williams before a Churchill Club audience in San Francisco. This is an edited version of their conversation about the ups and downs and future of Twitter.

Late last year, there were reports that Facebook offered you $500 million in stock. Is that true? There were talks, yes. I can’t comment on the price, but yeah, we did talk to them.

Did it get serious? It was very brief. I mean...

Like, “Hi, how are you? Here’s $500 million, do you want to join us?” Uh, a little bit more than that. We explored it, as we should, but it just didn’t seem like the right time.

Why not? I feel very strongly that Twitter has huge potential, and to sell it now would seem—even at a really good price—a little bit disappointing. We’ve gone through some rocky times. We had a lot of technology issues and internal issues that we were trying to fix. I feel like we are firing on all cylinders now, and the future looks very bright, and there’s no reason not to keep going.

I can’t imagine how many times you’ve been asked, “But how will you make money?”

We will make money, and I can’t say exactly how, because we can’t predict exactly what’s going to work.

Advertising is probably not it? We think there could be more interesting models. Those include the corporate users, who are using it in a bunch of different ways, either to sell goods or take advantage of the real-time aspect of the site. There are all kinds of goods and services that have a scarcity component, and people want the information as soon as possible, so they opt in to receive updates through Twitter.

Like an instant sale? Yeah. Dell Outlet is doing that, and [internet retailer] Woot.com. And corporations use it for marketing purposes, whether it’s Starbucks or Web companies. If we can make that really pay off for the companies doing it—and we have lots of ideas how to do that—they’ll be happy to pay.

Do you have tangible examples of companies that are using Twitter in a way that you think is pretty cool? We haven’t really studied the business cases that much. We’re 25 people, and 75 percent are focused on the product and engineering and operations. And we literally have no business people in the company, so this isn’t an area we’re really focusing on. But we hear of cases every day that are interesting—people using it as a real-time classifieds-type system, not even necessarily companies, but people who say, “Hey, I have something available, who wants it?”

Do you plan on hiring some business people? Um, yes. Yes, we are hiring. Just go to Twitter.com/jobs.

Do you get Procter & Gamble or companies like that saying, “We want to come talk to you and figure this out?” Yeah, every day. We don’t have any business people, though, so...

Will you work on an enterprise version that would be something corporations might use internally? I think Twitter will be used by companies for internal communications as soon as we have some private group functionality, but I’m loath to say we’re gonna have an installable app. I don’t believe a company can do really well doing the consumer internet thing and an enterprise thing.

Your users seem to want to be able to separate their followers or the people they follow into groups so that, for instance, they could send a tweet only to family or co-workers. Right now, all they can do is send to one big blob of a group. It’s been probably our top requested feature for the past year and a half, so it’s definitely on the road map, but we just haven’t been able to build it yet.

There also isn’t any way to sort all the tweets coming in from the people you follow. That’s really important as well. I follow about 900 people, and that’s...

You follow 900 people? Yeah. That’s too many. My wife gets angry that I don’t see her twitters. I want to have groups of must-see people. That’s on the list of things to do.

What else is on your list? A much bigger problem is that people sign up and have no idea what to do, because we haven’t solved that problem of getting started. So we’re focusing a little bit more on that right now. We’ve put so few resources into user experience in the past couple of years that it’s amazing that anyone uses Twitter today.

Do you have this feeling that this thing is like a train that’s just gotten away from you? It’s a really interesting time, yeah. I mean, I’m certainly not driving the train. I’m trying to see where those tracks are going. But yeah, it’s fantastic.

What do you want Twitter to become? I see no end in sight to its growth. If you look at the big internet companies today or big communications companies, there’s no reason that Twitter is a smaller idea. I worked on Blogger for almost six years, and I don’t think it’s nearly as big as Twitter will be—and by some estimates, Blogger is one of the top 10 sites on the Web.