How Twitter Makes Money?

Founded in 2006, Twitter is a popular social networking and micro blogging platform. Twitter is currently one of the fastest ways to get news and updates, as posted by news agencies, celebrities, politicians, government organizations, businesses and other entities. Twitter has millions of active users, which makes us wonder how it generates income to support its wide technology infrastructure. To answer that question, let’s take a look at how Twitter makes money.

Advertising services

This constitutes the major chunk of revenue for Twitter. Based on Twitter’s 2020 financial reports, 86% of the company’s revenue came from advertising services. That’s USD 3.2 billion in value terms. Twitter’s advertising services include promoted tweets, promoted trends, promoted Twitter accounts and sales of promoted products. Twitter utilizes an advanced algorithm that allows advertisers to connect with the right audience.

By doing so, the algorithm ensures that the products or services displayed in the advertisement have a higher chance of getting converted into leads and/or sales. The ads are displayed on users’ timelines, trending topics list or “Who to Follow” lists. Advertisers can also choose to display in-stream video ads or other content developed by their publishing partner.

Data licensing

This is the second highest revenue generating stream for Twitter. If we look at 2020 financial reports, this segment contributed USD 509.0 million or 14% of the company’s revenue. This figure also includes some revenue that is derived from other sources.

Data licensing is simply a legal agreement wherein Twitter sells the data available on its platform to research firms or other organizations. Data available with Twitter can provide key insights into consumer behavior and preferences, which can be valuable to organizations. Twitter sells both real-time as well as historical data to organizations that are willing to pay for it.

Twitter is preferred, as it is fast, crisp, easy to use and free. It allows direct interaction with people, which can be quite valuable for celebrities, politicians, businesses and other entities. However, Twitter has also become a hub for pushing fake news and other propaganda materials by vested interests. Although, Twitter has built safeguards for removing such offensive items, it is not in real-time. In most cases, the damage is already done by the time the offensive post is removed.

Twitter does have multiple benefits, but it continues to face challenges to curb fake news and false propaganda. So, if you come across a post on Twitter, make sure you double check the info from other sources before believing it as real.