Twitter is a real-time, global social media platform. Along with the common people, most celebrities now do tweets on a daily basis.
With its enormous reach, Twitter gained 330 million active users worldwide in 2020. In the third quarter of the same year, Twitter makes money around $936.26 million. But Twitter doesn’t show ads, unlike other social media. So how does Twitter make money?
Well, the revenue stream particularly includes promoting tweets and data licensing. In 2010, Twitter introduced advertisements on its platform in the form of “promoted tweets”. Thus, expanded business. Additionally, promoting Twitter trends using the hashtag (#) is another business feature. Depends on the given information and usage, promoted content appears to the user to whom it’s the most relevant.
The live sports after the lockdown and the US presidential election cited on Twitter helped in the revenue growth. This microblogging service has an impact on marketing and promoting one’s business. Let’s dive into Twitter’s revenue model and how does it make money.
History of Twitter- How It Was Founded?
Twitter was built using Ruby on Rails, a web application framework for the Ruby computer programming language. Evan Williams and Biz Stone designed it on March 21, 2006. Both of them worked for Google previously before leaving the podcasting venture called Odeo.
Willams began to experiment with a short messaging service (SMS) called “Twttr”. After seeing a good future potential, they involved Jack Dorsey in their team to develop it. He made a completed version of Twitter, which debuted in March 2007.
Initially, users could tweet within 140 characters. Then, it was extended up to 280 in November 2017. However, audio and video tweets are still limited to140 seconds. By 2012, 100 million users started using Twitter. In 2013, it ranked in the list of “ten most visited sites”.
Twitter earned its popularity quite quickly. But primarily, it couldn’t generate revenue as there was no earning way. No ads, no membership. Hence, no revenue. So they started to think about monetizing this platform.
Finally, in 2010, Twitter found its way to make money. They introduced “Promoted tweets” as ads in the form of a tweet. Users can see those tweets in their news feed just like other tweets. Additionally, with two more other revenue streams, Twitter is now making money.
Twitter Financial Statement
In 2019, Twitter earned a total revenue of $3.46 billion. Whereas, during the 2nd quarter of 2020, Twitter stated that revenue was $562 million, down 23%. Also, the advertisement revenue downed to 15% in the last three weeks of June.
However, in the 3rd quarter, Twitter rises to 37% and makes around $936.26 million. The majority of the revenue is from advertising following data licensing and others.
What Are the Revenue Sources of Twitter?
As already mentioned, the main sources to generate money for Twitter are promoted tweets and data licensing.
Let’s see how do they make money.
1. Promoted Tweets- Tweet Ad
Advertisement service on Twitter enables the user to promote their product/service through tweets. One can view promoted tweets just like usual tweets. They appear on your timeline, user profiles, top of the search result, official Twitter clients etc.
Promoted tweets target either specific audiences or a larger one. Sometimes these tweets focus on their existing followers, not the new ones.
As promoted tweets appear on your Twitter feed, you can see them while scrolling. If you’re not interested or don’t want to view it anymore, hide it. Again, you have the option to stop them from re-appearing.
Moreover, promoted tweets are a better strategy for your marketing. If you want to make a big announcement about a marketing campaign or upcoming new event, it’ll help you build awareness.
Promote Tweets-Quick Steps: So how to get started? Follow the steps below.
- Firstly, choose a tweet to promote.
- Secondly, click “Promote this tweet”.
- Then, select the location (country/state/region/metro area) where you want to promote.
- Select your budget and enter the payment information.
- Lastly, confirm your spending to watch your tweet reach in real-time.
However, carefully follow the Twitter rules and guidelines before promoting. Any adult or political content, alcohol, tobacco are prohibited from promoting on Twitter. Because anyone can retweet it. When you change the original content; consequently, others will have something else on their profile.
The Goals of Twitter Advertising: Twitter is a great place for your digital marketing. With Twitter ads, you can reach your business goals, along with wider audiences. The major goals of Twitter advertising are:
- Generate awareness of your brand, products or services.
- Engage with the clients effectively.
- Create more traffic to your website.
- Encourage customers to install your business app using Twitter ads.
- Build relevant followers.
- Create short videos for your brand promotion through Twitter ads to build audiences.
The Revenue from Promoted Tweets: The average cost of promoted tweets is $1.5 per action. You only pay when someone retweets it or reply and favorites it. In the third quarter of 2020, Twitter earned $808.4 million, only from the Twitter advertisement. It increased to about 18% compared to 2019.
2. Promoted Account and Hashtags Trends- Twitter Business
Hashtag on Twitter is the biggest trend. For example, #BlackLivesMatter raised social activism.
Promote the trend along with your entire Twitter account for business. Thus, discover users who may get interested in your business.
The Goals of Promoted Account: Like promoted tweets, a promoted account helps you find a wider range of followers. The primary goals are to
- Increase the visibility of your account instead of a tweet.
- Expand your Twitter reach.
- Gain more followers.
- Suggest your account to the targeted audiences in their home timelines, “Who to follow” section and search result.
- Get a promoted label on the account.
The Cost of Promoted Account: The promoted account costs $2.50 to $4 per follower.
The Goals of Promoted Hashtag Trend:
- The promoted trend runs for 24 hours in the targeted country.
- It benefits brands to maximize the discovery.
- Easy to promote or launch a new event using a promoted hashtag.
- Additionally, the promoted trend gives an idea of what’s happening presently. Thus, it helps to achieve targeted audiences.
The Cost of Promoted Trend: $200,000 per day.
3. Data Licensing and Others for Twitter Business
Data licensing is for non-advertising businesses on Twitter. The organizations come to Twitter to collect data to promote their new products/services and marketing campaigns. On the other hand, the slowdown of Twitter’s core advertising gives data licensing and other sources a real opportunity to grow.
Eventually, the data licensing business sells a firehose of over 500 million tweets over a day. Companies like analytics firms, different news agencies and other trading firms are involved in the Twitter data licensing business.
Companies analyze the data to identify the consumer trend. Thus, it makes sales. Also, the tweets are public. So, the consumer can access the data.
The Revenue from Data Licensing: Twitter made a revenue of around $127.8 million (nearly 14%) in the third quarter of 2020 from data licensing. At least 5% more compared to the previous year’s same quarter’s earning.
However, in 2018, the total revenue was $425 million. Whereas, in the first quarter of 2019, Twitter earned $107 million from its data licensing business. A 20% increment from the previous year.
The Upcoming Developments of Twitter
Twitter is updating its feature for well and good. Its recent and upcoming developments bring more diversity.
- Twitter is making efforts to stop misleading information. Twitter has been adding labels to the potential unauthentic information on its platform. For example, during the US presidential election, Trump and others tweeted about winning before the final result.
- Twitter will grow its monetizable active users by at least20% in the coming year.
- Additionally, Twitter is planning to earn a share from digital marketing.
- Moreover, there will be more ad placements and tools to accelerate revenue.
Twitter- Diversity and Inclusion
Twitter is working on the progress of the diversity challenge. They aim to reach at least 40% BIPOC editorial contributors and staff, including 15% black contributors.
Eventually, Twitter is creating a transparent image through a commitment to diversity and inclusiveness. They are recruiting without any preference of gender, sexuality, generations or socioeconomic backgrounds.
Twitter is also trying to improve financial literacy within the black community. Within 2025, it’s expected that 25% of the US workforce to represent the minorities, including 10% of Black Tweeps.
Future Prospectives
Twitter may be able to make money from its potential users. But, the report has been shown Twitter is still struggling when it comes to earning profit.
Twitter needs to think about monetizing with international users as well. Working with small businesses rather than spending money on advertising only may create a hurdle while making a profit.
However, the bank of America is looking for further increment in the upcoming revenue. They are expecting at least 15% growth in 2020 as they invest an amount of $342 billion throughout the year.
Furthermore, Twitter plans improvements in issues like overvalued stocks, negative profit, small user base, less user engagement, etc. At the same time, investors are backing out because of the non-profit. That’s why Twitter needs to upgrade its monetizing technique and hence, growth in the revenue.
Conclusion
With a diverse audience, Twitter is growing day by day to its potential. In a word, it’s becoming the most influential and useful platform for businesses and social awareness. Expanding business with wider audiences create interest and demand.
On the other hand, while the revenue is growing, Twitter plans to bring more opportunities to earn a profit. Twitter makes partnerships with GoogleAds, DoubleClick to boost up the revenue. Above all, Twitter is an effective way of communication. Further up-gradation in the Twitter business model may make it a profitable company.