How Twitter has become the people's voice on the eve of its fifth birthday

Blame Stephen Fry. In Twitter the preening polymath found his true calling, sending out an ever changing and oddly riveting mix of self-promotion and stream of consciousness as he tweeted his every thought and photo. His thoughts on Boyzone singer Stephen Gately, a picture of a parrot, a call for charity in Sri Lanka, Stephen in a balloon hat, all mixed in with his Wildean wit: "Streets of London fantastically full of young people. Either it's half-term or truancy in this country is running wildly out of control." Millions came to watch, millions more joined in. You may scoff but we are all Stephen Fry now.

Twitter is five next month. There are now 190 million people using the micro-blogging website, sending 65 million messages of 140 characters or fewer around the world each day. Knockers may still dismiss the service as silly but Twitter – or some form of it – looks set to be with us for some time to come. For its legion of fans Twitter is part of a social media revolution that is reordering the way the world communicates, shaking up politics, business and social life and even, some argue, fuelling and co-ordinating historic upheavals from Iran and Tunisia to Egypt. The revolution will be twitterised.

Last week the Californian business received another, more concrete, recognition of its status. Google and Facebook are reportedly courting Twitter. The price tag for this still loss-making venture is put at $10bn (£6.24bn). Just two months ago Twitter was valued at $3.7bn after raising $200m in new financing. In the meantime investors have gone mad for all things social media and Twitter has become one of the hottest properties on the block.

The appeal comes because Twitter genuinely offers something new, says Douglas Rushkoff, author and media theorist. Twitter is "the first people's broadcast medium," he says. "You can do it now, it can go everywhere, and you don't have to sit with it. The best thing about Twitter is that it is not sticky the way things like Facebook are. I can throw out tweets without having to field a zillion emails or nurse some profile or deal with anything else. I can fling and not receive."

Twitter's first broadcast went out on 21 March 2006 when Jack Dorsey, a software engineer at a podcasting company called Odeo, sent a text message to a group of colleagues using a new system he had devised. "Just setting up my twttr," Dorsey wrote. It was the first tweet.

A year later Twitter was the hottest act at South by Southwest, a music and film festival beloved by tech people who like to pretend they aren't all about the money. During the event Twitter messages shot up from 20,000 a day to 60,000 a day. Twitter's founding trio, Dorsey and his colleagues Ev Williams and Biz Stone, were about to become media sensations.

Celebrity users included Fry, Lindsay Lohan, Lady Gaga and Ashton Kutcher. Even Dame Elizabeth Taylor loved Twitter. Justin Bieber seemed to build an entire career off the site. Five years later they continue to love it. Only last week Lohan tweeted her innocence as she faced charges in a case involving theft from a jewellery store.

All this celebrity endorsement sent Twitter usage rocketing. The firm and its founders graced magazine covers and TV shows around the world. But we have been here before. Remember Second Life? The San Francisco company that set up a 3D virtual world enjoyed a similar moment in the sun. A fake U2 and a real Duran Duran played live on Second Life, Sweden opened an embassy, Reuters set up a bureau in cyberspace to cover the goings-on. The virtual future arrived and then just as quickly departed. Twitter has proved more enduring.

Some of the froth came off its image during the protests that surrounded the 2009 presidential election in Iran, dubbed the Twitter Revolution. Enabling "ordinary" people to broadcast in real time has also been seen by some as instrumental in the protests in Tunisia and Egypt. But this vision of Twitter as agent of social change is not without its critics.

Evgeny Morozov pans "cyber-utopianism" in his new book The Net Delusion. As he points out, there were only 19,235 registered Twitter accounts in Iran (0.027% of the population) on the eve of the protests. The biggest night of protests in Egypt came amid an internet blackout after the government pulled the plug for most users. Morozov argues that social media works as well for tech-savvy dictators and government spooks as for pro-democracy advocates. The Twitter revolution in Iran ended in a violent crackdown and 2,000 new political prisoners. China has effectively blocked Twitter. In the US, the firm has been subpoenaed by the justice department keen to get hold of private information about Wikileaks' collaborators.

Mohammed el-Nawawy, author of Islam Dot Com, says Twitter is important. "There's no arguing that Twitter has played a key role in these events," he says. The speed at which Twitter operates, its mobility and its reach made it incredibly useful for people desperate to get their voices heard. "I remember when Wael Abbas [the Egyptian journalist] was arrested at Cairo airport. It was 3am and he tweeted he'd been arrested, the message was picked up by bloggers in Canada, and they called people in Egypt to come to his aid. That's amazing," he says.

But el-Nawawy said Twitter needed to be seen in perspective. "Social media played a role but this isn't about social media. Now things are at street level in Egypt, most of those people haven't even heard about Twitter. In the Arab world satellite TV has played a much bigger role than social media," he says. Al Jazeera's coverage of the unrest has reached far more people than social media ever could.

Today's hot properties can soon lose their lustre. Myspace was once the buzziest social media firm on the planet, now it's sacking staff as rivals go on a hiring spree. "Platforms can be abandoned pretty quickly," says Colin Gillis, an analyst at BGC Partners. "Myspace shows that. But at the same time there is only one Twitter out there. Scarcity has a value and scale is hard to acquire."

Eventually Twitter will have to answer its biggest question: how is it going to make any money? Last year revenues are believed to have topped $45m and they are expected to double this year. But those are tiny sums for a company supposedly worth $10bn and Twitter made a loss last year after spending all that money on growing its business.

Twitter isn't the first fast-growing business without a coherent business model. Naysayers had (and some still have) their doubts about Facebook. Even Google struggled to find its money mojo; now it's one of the biggest cash generators in history. Last year Google's earnings topped $29bn.

In the end, says Paul Kedrosky, Twitterholic investor and author of the Infectious Greed blog, Twitter is worth whatever anyone will pay for it. Anyone paying attention should realise that is going to be a very big number, he says. The service has become the "ubiquitous fabric" of online real-time conversation and it would be extremely hard for another company to replicate that. "Twitter is the dial tone," he says. "It's transforming how we communicate."

And Twitter is making its way toward making money. The firm now offers sponsored tweets to advertisers and reportedly sells out every slot available. Last year the company reported that 20% of tweets – roughly 83 messages per second – contained a reference to a product or brand. It's not hard to see that there has to be money in there somewhere.

Huffington Post has been sold to AOL, Facebook is preparing to let staff sell $1bn in shares as it lines up a $60bn flotation, Groupon and LinkedIn look set to join the stock market too, making their founders billionaires. Twitter's future is more obscure. Many of its fans reacted angrily to news that it could sell out. Too much advertising could drive users away.

As its fifth birthday approaches sources close to Twitter say the firm doesn't want to sell. Right now it's managing its balancing act quite nicely. And anyway its investors think $10bn is just the start. No matter how things eventually turn out, no doubt we will read all about it on Twitter.