With 1.3 million created accounts and 500 million published tweets per day, Twitter is one of the biggest and most prevalent social media platforms of our time. We don’t just keep up with the latest news on Twitter and follow politicians and celebrities, share our thoughts, and interact with the world. Since Twitter’s humble beginning in 2006, Jack Dorsey’s vision about a microblogging platform where users can share personal status updates blew up and proved to be a billion-dollar idea. – 35.2 billion to be exact, as of September 30, 2020.- But how does Twitter make money exactly? This is a valid question since twitter is a free platform to join and use. The answer is that Twitter generates revenue, mainly with on-site advertising and data licensing. If you want more insight into how Twitter’s revenue stream works, here we gathered the essentials for you.
Twitter’s Advertisement Services to Make Money
Twitter makes most of its revenue by selling advertisements. In the second quarter of 2020, Twitter’s revenue from advertising was 562.0 million dollars, which makes up about 82% of Twitter’s total income. As people nowadays consume more online media than printed mediums and television, it is no wonder that businesses are trying everything to appear in front of their consumers at online platforms. So, for turning this need into a profit, Twitter offers promoted tweets, promoted accounts, and promoted trends for advertisement purposes.
Companies can promote their products or businesses via tweets that show up on Twitter users’ timelines. These tweets target the users that are most likely to be interested in the product. Twitter determines who to show the promoted tweet based on the user’s location and demographic, which Twitter accounts they are following and engaging, and the device they are using. For example, a person who follows sportswear brands is likely to be the target audience for gym memberships.
Typically there is no flat fee for these services. Instead, companies will pay for these services according to the number of user actions like the number of clicks or retweets on the particular promoted Tweet.
Twitter usually suggests every user a few Twitter accounts which may interest them. These suggestions are based on the common accounts they follow, combined with Twitter users’ similar demographic qualities. The promoted accounts display in the user’s timeline, “Who to Follow” section, and amongst the search results. Companies can pay a fee to be a suggested Twitter profile to get more followers and promote their brand to the audience that is the most relevant.
Trending Topics, also called TT, are words, phrases, or hashtags currently repeating on Twitter. They are useful to discover and join the latest discussions. Companies can pay Twitter to show up in the Trending Topics with a relevant phrase for some time. So the promoted topic will usually be in the first or second slot of the “Trends for You” section in the user’s timeline, and they will be marked as “promoted.” Users clicking the promoted trend will see the search results for that topic under a related promoted Tweet from the advertiser. Trending Topics can be a great tool to generate buzz around your company to grow your Twitter reach and presence.
Licensing Out Public Data
In addition to on-site advertising services, Twitter makes money by licensing out public data generated by it’s 330 million users. This is also called firehose data. So companies purchase the rights to access, search, and analyze historical and real-time data from platforms like Twitter to analyze consumer trends and get insight into online behavior to create brand strategies and foresight analytics for their clients.
Twitter’s service fees generated by MoPub is another source of Twitter’s income. MoPub is Twitter’s publishing platform for mobile applications. It is used to purchase and sell mobile app advertising inventory. From each transaction taking place on MoPub, Twitter receives a service fee.
FAQs on How Does Twitter Make Money
Twitter’s annual revenue came up to 3.46 billion US dollars in 2019, and Twitter’s net worth is around 35.2 billion dollars as of September 30, 2020.
Twitter is very public in that they collect, use, and share data they generate from their users, which they mention in their services. Twitter has the right to sell its users’ data except for any personal, identifiable information that is not already visible on the service. Companies purchase this data to garner consumer insight for their clients.
Twitter offers businesses to advertise by promoting tweets, promoting accounts, and promoting trends. So these services don’t have a flat fee. Companies pay for these services according to the user action, like clicks and retweets.
Yes, despite the strong user growth, Twitter reported an operating loss of 7.44 million US dollars and a common net loss of 8.4 million US dollars in the first quarter of 2020. This loss is mostly due to companies tightening their advertising budgets because of the CoronaVirus Pandemic.
Twitter spends money on three main channels; research and development, sales and marketing activities, maintaining and developing the technical infrastructure.
Conclusion on How Does Twitter Make Money
To conclude, Twitter is among the biggest and most well known online social media platforms today. Signing up and using Twitter is free. This arouses the question of how twitter makes money. To summarize, Twitter makes money through in-house advertising, data licensing, and MoPub. So, Twitter’s advertising activities consist of promoted tweets, promoted accounts, and promoted trends, making most of Twitter’s revenue. While the revenue of selling data generated by Twitter’s users is not the main income; the business of data licensing is growing. So despite the public’s privacy concerns of selling user data, it is most likely that Twitter will continue on Data licensing and even have an opportunity to grow its revenue further by this channel.