How Does Twitter Make Money: Twitter’s Business Model

Ranked #3 in the list of social media apps loved by people between the ages of 15 and 40 is Twitter. It is a giant microblogging site and social networking platform that started as an SMS platform when it was first launched in 2006. Over the past decade, it has constantly grown to be one of the most popular social media sites, with over 100 million daily active users.

Twitter is used to promote brands, share ideas and work, or just connect with friends. Since Twitter has brought people together in so many ways, you should then be wondering “how exactly does Twitter make money”. This article answers this question and lots more. Keep reading. 

What Is Twitter?

Twitter is one of the most popular social media apps. It was founded in 2006 in San Francisco, California by Jack Dorsey who is the current CEO, Evan Williams, Noah Glass, and Biz Stone. The company officially went public in 2013. As of November 9, 2021, Twitter’s stock price went up to $53.57 from its initial $23.

Twitter ranks among the biggest social networks worldwide. It functions to bring people together from all over the world. In the second quarter of 2021, the company reported 206 million monetizable daily active users worldwide.

In 2020, Twitter’s annual revenue came to $3.72 billion. Twitter is a social network in the form of a microblogging website. Message on Twitter is short, having not more than 280 characters. When communicating with others, you can also be allowed to use images and videos. Video clips can also be attached, as long as they can be capped at 140seconds. However, some people can have clips go as long as 10 minutes. 

Users on Twitter mostly communicate with each other through “tweets”. Tweets are short messages for public view. Users can also send private messages to other users for more extensive conversations. Because the content is so short, it is called “microblogging” and often links to more robust articles or content.

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How Much Does Twitter Make?

You must think that with the number of users Twitter has, it constantly pulls in money from all around. It may surprise you to know that Twitter hasn’t started making a lot of money through its popular app. However, after years of stagnation, they seem to slowly be making it to a new form. Recently, Twitter added mDAUs at a faster rate this year than the past three and noticed higher year-on-year growth, even though this may be as a result of the pandemic. In the past years, the amount of money Twitter has made is- 

  • Twitter generated $3.7 billion revenue in 2020, an 8.8 percent increase in year-on-year
  • 86 percent of Twitter’s revenue came from advertising in 2020
  • Twitter posted a net loss of $1.1 billion in 2020, which was the company’s first annual loss since 2017
  • Twitter has 186 million daily active users and 38 million users in the United States
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Despite generating $665 million in total revenue in 2013, which represents a 110% increase year-over-year, Twitter still posted a net loss of $645 million in 2013. While the revenue numbers continue to increase and the micro-blogging platform continues to explore other monetization opportunities.

What Is The Purpose Of Twitter?

Twitter has several purposes which are mostly why it makes money. When users see all the purposes that twitter is bound to give out, they decide to sign up, and hence, help Twitter to maximize profits. The major purpose of Twitter is- 

1. Networking

The foremost purpose of a Twitter account is networking. Like all social media, with Twitter, you can network with people from all around the world, from your mobile device in the comfort of your home.

Twitter’s system of shortened links and hashtags makes it easy to find people or businesses posting tweets in the same areas that you are. Hashtags are hyperlink keywords embedded into tweets; you can turn any word into a hashtag by adding the “#” sign before the word in the body of your tweet. Twitter’s “@Mention” system allows you to contact any other Twitter user, regardless of whether or not they follow you, by placing an “@” symbol in front of the Twitter user name in the body of your tweet.

These features are things that most other social media networks do not have. As such, it is what mostly drags people to sign up on Twitter. 

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2. Building Traffic

Twitter was created to build traffic as well. With this, many businesses, bloggers, and website owners use their Twitter profiles to increase traffic and find new visitors to their websites. When as a business owner, you can comfortably embed tweets into your Twitter account and your posts have a way of helping you increase traffic to your website.

It also has link-shortening services that allow you to create links with as few characters as possible to leave space within Twitter’s 140-character limit. Most of these link-shortening services also allow you to track statistics and see how many Twitter users click your links. This feature brings businesses, bloggers, and website owners to sign up and build an account. As such, aiding Twitter with its revenue. 

3. Business Promotion

At the forefront of how Twitter makes its money and the purpose of Twitter is business promotions. Using Twitter provides the opportunity for you to take innovative approaches to promote your business.

Many businesses specifically offer special deals and promotions exclusively through Twitter. Twitter’s “retweet” function allows other Twitter users to re-post your tweet if they find it interesting; being retweeted by several popular Twitter users can significantly increase exposure for your tweet and your business.

You can also use your Twitter account as a way to allow your customers to get in touch with you directly without having to go through customer service. Imagine a hundred persons at least, retweeting your business post they find interesting. Imagine the feedback you could get from that. Some persons also pay Twitter for business promotions through the use of ads, hence, boosting the amount of revenue Twitter makes, and still making the most out of the social media presence. 

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4. Social Communication

Although Twitter has become a useful business tool, many Twitter users still use the service to share what they are doing with their friends online. You can use Twitter to tell your friends what you are doing or share interesting websites you find online.

Twitter photo-sharing services, such as TwitPic and YFrog, allow you to post photos to share with your friends through Twitter. You could also private message someone on Twitter. Such that if someone makes a post you find interesting or you want to ask someone a question, you can go straight to their inbox without having to ask the question publicly on their tweet. Twitter in many ways, aids social communication. 

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How Does Twitter Make Money?

With thousands of users worldwide, Twitter has to have a way to pull in money. Right? Currently, there are two ways through which Twitter makes money. They are through advertising and data licensing

#1. Advertising Services

Twitter has a lot of users. As such, it would be easier for it to make a lot of money through advertising. Advertising services make up a huge part of Twitters revenue (86%). Twitter runs this advertising in several ways. That is through Promoted Ads, Follower Ads, and Trend Takeovers. All ads are always marked as “Promoted” on the feed, allowing users to know the difference between ads that are promoted and the ones that are not.

Twitter also offers advertising services through its promoted products. These promoted products are:

1. Promoted Accounts

The promoted accounts form of promoted products simply implies that Twitter suggests new accounts to allow the users to get followers. It does this using your preferences, location, and overall activity. In order to gain more visibility and increase your number of followers, you can pay Twitter to promote your account so that they appear as top suggestions. When other users click on the promoted accounts in the suggestions, Twitter receives the income.

A topic is considered trending on Twitter based on how many times it and related keywords are mentioned in tweets. When a topic sees a sudden spike in popularity, it is trending. It pays to see advantages in things like these. As a result, companies have seen that when their business or services is trending, they tend to make more profits as it would get to many people at the same time. They take advantage of this by paying Twitter to promote the page or company when the topic related to the services they offer is trending. That way, they can get more users to contact them and in turn, Twitter makes money off it. 

3. Promoted Tweets

Twitter also makes money through promoted tweets as part of its advertising services. When Twitter promotes tweets, it appears on users’ timelines as “promoted.” This is done by using your overall activity to promote tweets that cater to their specific interests. When you pay Twitter to promote your tweets, more users on the app can see it and in turn, Twitter earns. 

The price of Twitter advertising services varies, depending on what you want to get done. A promoted tweet can cost between $0.50 to $2 per action while a promoted account may cost $2 to $4 per new follower. Promoted trends vary widely and can cost as much as $200,000 per day to be aligned with the most popular topics on Twitter. You can then pick the one that aligns with your pocket, help Twitter make money, and get your own benefits as well. 

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#2. Data Licensing

This is the second way Twitter makes money. Data licensing entails selling subscriptions to public data to companies and developers. With the data licensing, is able to give insights both in real-time and historically about Twitter, the platform, and the user demographics. Data licensing makes up about 14% of Twitter’s revenues, so much that Twitter made about $509 million in 2020, up from 9.2% in 2019. 

Beyond its public application program interface, Twitter sells subscriptions to public data to companies and developers seeking to search and evaluate real-time and historical data on the platform.

Companies can draw rich data from more than 100 million daily active users, which can help them cater to consumer needs more personally. Twitter generates its income from data licensing in two ways-

1. Mobile advertising exchange services

Twitter offers mobile advertising services through the MoPub exchange. MoPub is a Twitter service offering monetization solutions to mobile app developers.

2. Provision of data insights

Twitter’s partners and companies that subscribe to premium APIs have permission to search and analyze past and real-time information found in public tweets.

In addition, Twitter also uses ad engagements or user actions to gauge revenue performance. The services Ad engagements offer include replying to, retweeting, or following promoted accounts, or viewing advertised services or videos. Changes in ad engagement help Twitter analyze users’ responses to advertising products or services. 

Conclusion

Though its business has not been without controversy for questionable information dissemination, Twitter is already one of the largest social media platforms on the Internet, giving it a lot of room to continue expanding its revenue streams. This revenue comes from data licensing and advertising services, such as promoted accounts, promoted trends, and promoted tweets.

Frequently Asked Questions On Twitter

How does Twitter make profit?

Twitter divides its revenue into two categories: the sale of advertising services, which constitutes the vast majority of the company’s revenue, as well as data licensing and other services. 

Who is Twitter’s major competitor?

Twitter’s top competitors include YouTube, Meta, Instagram, Google, Snap, LinkedIn, WhatsApp, and WeChat.

What is the business model of Twitter?

Twitter is a platform business model, monetizing the attention of its users in two ways: advertising and data licensing. In 2019, advertising represented 86.5% of its revenue at almost $3 billion.

Do celebrities get paid for tweets?

Frankie Muniz of Malcolm in the Middle fame who goes by the handle @frankiemuniz on Twitter where he has over 175,000 followers is the best-paid celebrity earns a whopping $13,000 per tweet. 

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