As an American Social Networking and Micro-blogging service, Twitter is a popular and the most utilized social media platform, which was created by Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams in the year 2006. It helps build a bridge between its users to stay in contact and communicate with the world through a virtual setup. The business model of Twitter revolves around a range of products and services such as Brizzly, Favstar, Easy Chirp, Gwibber, flick, Gnip, INQ, HootSuite, Hotot, Tweetbot, Twitter, TweetDeck, TwitPic, Twitterrific, and Twitterfall.
Twitter Business model monetizes its user-base via advertising and data licensing. In the year 2019, advertising played a significant role in ensuring 86.5% revenues for Twitter, which was around $3billion, while 13.5% of revenues were generated by licensing, which were around $465 million.
Twitter has successfully become an integral part of our day-to-day lifestyle in a manner that has created a list of terms and vocabulary that are preferably used in social media as well as daily activities. Today, from a celebrity to a common man can own a Twitter account and communicate with each other via tweets, follow direct messages, re-tweets, Hashtags, mentions, and create a solid and exciting handle.
This post will delve into the inner working of Twitter as a business and how it earns money.
We will take a look at the business model of Twitter to understand how it makes money and the services it provides to the users for free. Being a social media platform, it is easy to assume that most of the revenue comes out of an advertisement.
Let us begin to look into the journey of Twitter so far-
Introduction to the Business Model of Twitter
Twitter had an interesting topic when it came to its evolving business model. It rose from its ashes from a failed startup named Odeo, which was an initial SMS service platform, it moved towards the world of social networking.
The initial years were not very smooth for a platform like twitter to uphold its services and fulfill the social networking broadcast platform’s goals. Twitter’s business model had not evolved much with the absence of similar business models.
Soon the business model evolved, and more brands, services, and products formed partnerships with twitter to promote themselves. Today, twitter is the go-to platform for brands to launch their products or their business.
Big corporations take to twitter in high esteem and always resort to twitter for any inspiration.
However, the Twitter business model entirely depends upon its customer base, and that is why Twitter users are the primary revenue generators and profit resources of its business.
What is Twitter Business Model exactly?
Twitter is a micro-blogging system that allows one to send and receive short posts up to 140 characters called tweets and include links to relevant sites and sources.
One can follow another user and send messages as well as re-tweet and mention them in your tweet.
It is the perfect platform to connect directly with people and allow one to share their opinion and thoughts with a broad audience.
The inception of the Twitter
Before Twitter came to be, Evan Williams was one of the founders who had acquired a massive amount of funding from selling his startup called Blogger to Google.
Odeo was the recent version of Twitter, which was founded by Noah Glass. Soon, Odeo shifted as a startup from Noah’s apartment to Evan’s- due to his high level of involvement and funding.
The development soon evolved to Odeo finally getting an office, hiring employees, including the web designer Jack Dorsey and Biz Stone, a friend of Evan from Google. By 2005, Odeo had developed a podcasting platform but immediately suffered a significant hit from the Apple iTunes who included a podcasting platform, making Odeo’s podcast completely irrelevant.
This was when Odeo’s employees went on a brainstorming mode to look for a new idea.
Jack Dorsey proposed creating a platform where people could update ‘status,’ a unique and interesting concept at that point. People could broadcast text messages about what they are doing to the public. Today, Jack Dorsey is the CEO of twitter as back in 2006; his idea was presented to Odeo’s directors.
Williams had gathered resources in every way possible and put it to help the idea to reach its fruition by repurchasing it from the investors. Evan named it Obvious Corp and fired Noah Glass. Today, if one goes to his twitter account, you can find the bio with the words “I started this.”
Key Partners of Twitter
Twitter’s primary partnership is definitely with its users, who continuously get involved in helping the platform survive every day.
Some users utilize the platform to promote their brand, services, and products through TV shows, advertisements, or news articles.
Twitter has also developed business partnerships with several startups and well-established corporations that help the symbiotic relationship of twitter and its users remain very resolute and desirable with positive outcomes in the business hemisphere.
Contemporary Global Presence of Twitter
There are over 330 million active users, with over 500 million tweets being posted per day.
Twitter’s total revenue in Q4 2019 reached $1.01 billion, while its advertising revenue amounted to $885 million, with a 12% increase year-over-year.
The mobile advertising revenue alone has gathered 88% of total advertising revenue. Twitter’s revenue per employee is $210,417. This growth is ever-evolving with the striking business model.
Revenue Generations by Twitter Business Model- How does Twitter Make Money
There are several sources of gathering revenue that twitter implements to make money.
1.Advertising on Twitter
The ubiquitous source of revenue for most social media platforms is advertising. All the revenue generated from ads occurs when users see different ads on Twitter like Promoted Accounts, Promoted Tweets, Promoted Trends, etc.
It transcends nationalities and continents, imparting the trend of globalization as well. The ads come in various banners and video ads that are shareable and clickable to be re-tweeted. More re-tweets lead to more revenue being garnered by twitter.
Even Hashtags do the same. 86 percent of the total revenue is generated through advertising. Promotional tweets allow brands to post ad campaigns and re-tweet them, while promoted accounts help the brand get popular, marketing business of twitter. For a viral tweet demanded by advertisers in the US market can cost $250000 in a day.
Let us have a detailed look at three different types of Twitter advertising-
Such Tweets are like regular tweets of users that are purchased by the advertisers who are looking for targeting a broader audience base by optimizing the reach or wanting to boost engagement from the existing followers.
The Twitter business model comprises Promoted Trends as a 24 hr high-impact trends list on Twitter. When advertisers use this, they will appear in the first or second slots of ‘Trends for you’ section of their followers.
Advertisers pay Twitter for promoting some of the Twitter accounts to the relevant users for optimizing followers. In this, Twitter takes money for running a follower campaign.
2.Data Licensing and other Sources
Over 500 million tweets are shared by twitter with data partners every single day.
The data partners can analyze and search historical and real-time data on Twitter with public tweets and their content. By offering data licenses, Twitter lets its partners search and access some key real-time as well as historical data. MoPub or mobile ad exchange is when twitter receives fees from transactions completed on an exchange.
That is, Twitter is the marketplace where buyers and sellers purchase and sell advertising inventory, helping match the buyers and sellers instantaneously. Over $333.3 million revenue is generated from data licensing and other revenue.
It is an alternative revenue-building method where the services are limited to some of the chosen companies, and Twitter, as per the channelization of Firehose system, shares over 600 million tweets each day.
4. Search Engine
Another money-making system comprised of the business model of Twitter is the Search Engine. Twitter takes the charges for letting Search Engine to display the streaming search results.
In the year 2019, the Twitter business model made $2.9 billion via its advertising services.
What factors affect the growth of Twitter?
Specific critical metrics are utilized to monitor the daily, weekly, and monthly results of a company’s success rate. Twitter has some to measure the success of its business-
- The Monthly Active Users, or MAU and
- The Daily Active Users or DAU.
The MAU growth trends, the DAU’s growth, and the monetization growth trends are reflected in the advertising engagements vital for twitter’s revenues.
These are the ways that twitter essentially generates revenue with the help of its business model.
The company, as a social broadcasting platform, has one of the best business models.
It successfully adheres to fulfill the needs of clients and users through a symbiotic relationship that helps all the parties to thrive and be successful in the process, Twitter, to gets the popularity and revenue.
On the concluding note, we hope that the Business model of Twitter will help you understand how this Social Media Platform generates revenue that has made it one of the leading businesses around the world.
Do you also have a Twitter account? Have you tried using the advertising potential of the Twitter Business Model? How profitable did you find using Twitter for optimizing your reach, lead generations, and conversions for your business?