Twitter is one large social media platform that attracts millions of users every year. I am sure many reading this article may be active Twitter users as well. It is a common saying to “let’s tweet” while posting anything on Twitter. If you are an active user or not, you might be knowing that using Twitter is entirely free. You do not need to pay Twitter for creating your account or using any feature on this platform. So, how Twitter is able to provide a social media platform to around 450 million active users across the globe for free?
The question arises: How does Twitter Make Money?
In this article, I would like to explain the business model of Twitter. And how Twitter generates revenue despite providing users with a free service.
How Twitter Makes Money?
Twitter primarily has two major revenue sources
- Advertising Services
- Data Licensing and Others
You also might wanna read: “How Does Facebook Make Money?”
The company drives and generates revenue using the above two mentioned models. Apart from this, there are no other methods deployed by the company to generate revenue as of now. Let us understand the two models in a little more detail.
1. Advertising Services
Twitter is home to 450 million active users. This may be just a number for us. But for advertisers, this can be a gold mine. What place would be better to promote your product or service? In a digital world like today, advertising is obviously digitized as well. Companies do not rely on traditional advertisement methods alone. They need to take advantage of a large number of users on social media platforms. Twitter is one of them.
Twitter provides business owners or individual owners to use Twitter for advertising. For running their advertisements on Twitter, they have to pay Twitter a particular amount. The amount would vary depending on a lot of metrics. This is the revenue source for Twitter. And currently the primary one too!
As discussed, Twitter has a large user base. Twitter segregates users and maintains their data in a very complex manner. They have many details of users that may be beneficial for advertisers. Twitter handles data metrics like the age, gender, location, preferences, and much more of any user. These metrics may sound simple to you, but they are not. It includes a lot of sub-metrics and algorithms that are handling user data.
As an advertiser, you can take advantage of these data metrics of all the users. You can promote your product or service to the right user type on Twitter. Let’s say, you are an owner of a real estate company. If you wish to promote your new real estate property, you can choose to display your ads only to users who are interested in property buying. It may be the most relevant advertisement for them. You wouldn’t want to show your property advertisement to someone who is a college student. He probably wouldn’t have the resources to buy any property as of now.
How Twitter Ads Work?
Twitter provides a whole advertisement and analytical platform for advertisers to run their ad campaigns. You can check that here: Twitter Ads
It provides 4 major components in its ad platform
1. Reach
It helps to ensure more and more people are shown your ad in their feeds. The users would be chosen as per your criteria for your target audience.
2. Engagement
It focuses on getting more likes, retweets, and clicks on your posts.
3. Followers
It focuses on converting more followers for your account.
4. Website Traffic
This feature is used to run ad campaigns that will help you divert traffic to your website. The website can be your blog, a product catalog, or even a landing page for your business.
This is a brief description of what Twitter provides to its users for advertising services.
2. Data Licensing And Others
Data licensing is some sort of legal agreement between the creator of the data and the end-user of the data. So, how Twitter can earn from this? Twitter sells its publicly available data to other companies for research purposes. As Twitter has millions of users, the data they sell is huge. It includes a lot of metrics and statistics as well.
Now, let us relate this to the data licensing definition.
Twitter is the creator of the data.
Companies purchasing this data are the end-users.
Companies use this data for research purposes. They can use this data to understand consumer insights, insights into brands, and other products. Such gigantic data can help them analyze trends in users, brands, services, behavioral patterns, and much more.
A thorough analysis of such data sets can help companies deliver their services better or to find a sweet spot for the next business model of their own.
Twitter Revenue Distribution: 2015 to 2022
As discussed, there are two major revenue sources for Twitter: Advertising and Data Licensing. Let us take a look at a quick table to understand how much comes from advertising and how much is generated from data licensing.
Note: The numbers have been approximated for better understanding.
2015 | $ 1.9 billion | $ 0.2 billion | $ 2.1 billion |
2016 | $ 2.2 billion | $ 0.2 billion | $ 2.4 billion |
2017 | $ 2.1 billion | $ 0.3 billion | $ 2.4 billion |
2018 | $ 2.6 billion | $ 0.4 billion | $ 3 billion |
2019 | $ 2.9 billion | $ 0.4 billion | $ 3.3 billion |
2020 | $ 3.2 billion | $ 0.5 billion | $ 3.7 billion |
2021 | $ 4.5 billion | $ 0.5 billion | $ 5 billion |
2022 | $ 4 billion | $ 0.4 billion | $ 4.4 billion |
Here is a table to look at the revenue numbers in percentages
2015 | 90.4% | 9.6% |
2016 | 91.6% | 8.4% |
2017 | 87.5% | 12.5% |
2018 | 86.6% | 13.4% |
2019 | 87.8% | 12.2% |
2020 | 86.4% | 13.6% |
2021 | 90% | 10% |
2022 | 90.9% | 9.1% |
The source for all the above tables is the official revenue data released by Twitter.
It is evident from the numbers that the major source of revenue for Twitter comes from its ad platform. As digital advertising is growing at a rapid rate, the revenue share of Twitter ads is likely to grow as well. The other chunk of revenue from data licensing is also significant. Although the percentage may be less as compared to advertisements, they still make up millions every year as the overall revenue has been in billions.