How Does Twitter Make Money?

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Twitter is one of the most popular social media platforms available today. Users can connect by sharing short posts called tweets using the app on a mobile device or the website on a desktop computer. Since the platform is free to use, it may be unclear at first glance how Twitter generates any revenue.

What Is Twitter?

Twitter is a giant microblogging site and social networking platform. It was first launched in 2006 and began as an SMS platform, which restricted tweets to 140 characters. Over the past decade, Twitter has grown to be one of the most popular social media sites, with over 100 million daily active users.

Registered users can post, send, receive and like tweets (now up to 280 characters), but unregistered users can only read them. Twitter is used to promote brands, share ideas and work, or just connect with friends.

Although the platform is 15 years old and has around 300 million monthly active users, it’s still in its infancy when it comes to profits. So, how does Twitter generate the money it does make?

How Twitter Makes Money

Twitter revenue sources are divided into two categories — advertising services and data licensing.

Advertising Services

Twitter offers advertising services through its promoted products:

Promoted Accounts

The platform suggests new accounts to follow based on a user’s preferences, location and overall activity. In order to gain more visibility and increase their number of followers, many users pay Twitter to promote their accounts so they appear as top suggestions. When users click on the promoted accounts in the suggestions, Twitter receives the income.

Promoted Trends

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. Companies can take advantage of trends by paying Twitter to promote their related brands and products during the trend.

An example is the National Football League, which may decide to pay Twitter to promote the Super Bowl during football season, or even more specifically, during a big game.

Promoted Tweets

Twitter can also promote tweets, which appear on users’ timelines as “promoted.” Twitter uses data from users’ overall activity to promote tweets that cater to their specific interests. The more users consume the promoted tweets; the more Twitter earns.

Data Licensing

Data licensing is Twitter’s second most important revenue source. 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 through data licensing in two ways:

• 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.
• 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.

Key Metrics Twitter Uses To Check the Efficiency of Its Revenue Model

Twitter uses monetizable daily active users (mDAU) to show ads at a given time, which helps gauge its revenue performance. mDAU refers to companies, individuals or accounts that use Twitter to feature their ads.

Twitter also uses ad engagements or user actions to gauge revenue performance. Ad engagements 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.

Twitter’s Revenue

The bottom line is that though Twitter is still in its infancy when it comes to profits, it does generate income. This revenue comes from data licensing and advertising services, such as promoted accounts, promoted trends and promoted tweets.

In 2020, the microblogging platform saw $3.7 billion in revenue, representing an 8.8% increase year over year — 86% of this revenue came from advertising services, according to Business of Apps. Although the company reported a net loss of $1.1 billion the same year, it aims to double its revenue by 2023.

Good To Know

Twitter is a publicly traded company on the New York Stock Exchange. The company recently reported total revenue of $1.04 billion in its first-quarter earnings, with $988 million coming from advertising services.

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