Today, Twitter boasts of more than 336 million active users on a monthly basis. That’s a lot of people using the platform regularly to share their thoughts and ideas. But have you been wondering how Twitter makes money? Surely, all those users must generate revenue for the company somehow, right? While Twitter is free to use for everyone, the company does bring in Twitter’s revenue through a few different avenues. In this article, we’ll look at how Twitter makes money.
What is the Twitter Business Model?
Before we dive into how Twitter generates revenue, let’s first take a step back and understand the big-picture view of Twitter’s business and revenue model. The key to understanding any business model is to think about how the company makes money. In other words, what does it provide to customers that they are willing to pay for? Thus, the Twitter business model is known as a microblogging platform that enables its users to send and read short messages called “tweets”.
Key Metrics Twitter is the primary income KPIs including (mDAU) or monetizable daily active users, changes in ad engagements, and cost per ad engagement. mDAU refers to accounts, companies, or people who use Twitter to see ads on a given day. In the fourth quarter of 2020, mDAU reached 166 million, an annual growth of 28%.
In terms of proposition value, Twitter provides the following advantages to several stakeholders:
Data Partner Benefits
Twitter offers data to marketing and advertising partners that help them deliver targeted content to users and assess their campaigns’ performance.
Twitter provides an effective platform for businesses to reach out to potential customers through promoted tweets and ads.
Twitter is a great way to stay updated on current affairs, trends, and what’s happening in the world. Users can also connect with like-minded people and follow their favorite brands and celebrities.
Instead of increasing the number of users or revenue, Twitter has focused on growing its business model through partnerships and acquisitions. This entails building a bigger data pool to increase the value of its ad products and selling more access to that data. This has caused some concern among privacy advocates, but it seems to work out well for Twitter.
Twitter has partnerships with Google’s ad serving platform, DoubleClick, to improve its ad serving and revenue-generating capabilities. However, this implies that Twitter would also have to share its advertising revenue with Google, thus reducing its earnings even further. Still, Twitter can make a good amount of money from ads to grow its user base and find new ways to monetize its platform.
How Does Twitter Make Money From Advertising Services?
Advertising sales generate about 85% of Twitter’s total income. In 2015, Twitter’s annual ad revenues were roughly $400 million. A person or business may use Twitter to promote their product or service to a large audience.
Advertising and data licensing are the two categories of revenue for Twitter. Let’s take a closer look at each one:
Twitter Advertising Services
The majority of the platform revenue, with 86% in total, came from Twitter’s advertising revenues. It is not too surprising when you think about it – after all, almost every social media platform relies heavily on the rise of the digital advertising industry.
The majority of advertising services include Twitter displaying promoted items through Promoted Trends, Promoted Accounts, and Promoted Tweets.
Promoted trends are the topics that appear at the top of users’ timelines in the form of a hashtag. How often a topic and relevant keywords are mentioned in tweets determines whether or not it is trending.
A topic is trending when it has a sudden rise in interest and popularity. Businesses can pay to have their hashtag included as a promoted trend, guaranteeing their topic will be trending. It is a great way to get your brand or product in front of many people very quickly.
For instance, when the Marvel movie Avengers: Infinity War was released, Twitter lined up a series of promoted trends to coincide with its release. Promoted tweets related to the movie appeared at the top of users’ timelines, further increasing the movie’s reach and visibility. Using a promoted trend as an advertising service is a great way to jump on board with a current event or pop culture phenomenon.
The platform suggests new accounts to follow based on a user’s interests, location, and overall activity. Many users pay to promote tweets in their accounts so that they appear at the top suggestions in order to increase visibility and boost followers.
Of all of a user’s tweets, the type that is labeled as “promoted” is the most popular. Twitter algorithms aim to show promoted tweets on users’ feeds that are the most relevant to them to promote a service or product. Twitter receives income when users click or tap the promoted accounts in the suggestions.
Users are given recommendations about “Who to follow” on Twitter. It is determined by a user’s location, demographics, preferences, and overall activity on the site. It may help a new business or an existing one go viral with a new marketing effort.
Advertisers may use promoted accounts to create a community of enthusiasts on Twitter interested in their items or services. Many individuals pay Twitter to boost the visibility of their accounts, making them top suggestions. When people click the sponsored accounts in the suggestions, Twitter makes an income.
Along with the content, video and photo previews are shown in the tweets, allowing advertisers to promote their products to target audiences better. When users click the promoted tweet, they are taken to the advertiser’s website. The advertiser is then charged based on how often their tweets are clicked. So Twitter can make money with its advertising services through the number of clicks on the promoted tweets.
Though the budget is specified at the start of the promotion, advertisers are charged per retweet or click. Advertisers may also bid for that particular space to display their content. Twitter’s ad income from mobile devices is about 65 percent.
How Does Twitter Make Money From Data Licensing?
The other significant source of revenue for Twitter is the data licensing. This category accounted for 14% of the company’s total revenue. Essentially, Twitter sells access to its large database of tweets and user information to third-party publishers websites.
Twitter sells subscriptions to public data partners, businesses, and developers that wish to search and analyze historical, real-time data on the platform. Thus, It is the average number of tweets posted every day worldwide. Consider the amount of information that may be gathered from this source. This data is referred to as the “firehose” by Twitter, and it is available to businesses for a price.
Companies may acquire valuable information from over 100 million daily active users, allowing them to better respond to individual customer needs. Twitter earns profit by licensing data in two ways: Provision of data insights and Mobile advertising exchange services.
Provision of Data Insights
Premium API subscribers and Twitter’s partners have access to evaluate and search real-time and historical data accessible in public tweets. Customers access this information through Gnip, Twitter’s data licensing subsidiary.
Gnip was acquired by Twitter in April of 2014 for $134 million. It is now a wholly-owned subsidiary that manages customer relationships and provides data products, support, and training.
There are three types of Gnip products:
- Historical PowerTrack: this allows customers to search, analyze, and receive data from the entire Twitter historical archive dating back to 2006.
- 30-Day Search API: gives the customer access to a subset of tweets from the past 30 days.
- Full-Archive Search: provides access to all public tweets dating back to Twitter’s inception in 2006.
Mobile Advertising Exchange Services
Twitter launched its first mobile ad exchange product for mobile app developers called MoPub. It is an ad server that helps manage in-app advertising and drive revenue. This product allows developers to insert tweets into their apps as native ads. These ads are more seamless and less intrusive than other types of in-app advertising.
Twitter is continuously evolving and innovating to find a new source of revenue model. So we can expect that the company’s revenue sources will continue to change in the future.