Convertible Notes and Startup Funding
February 12, 2025
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Warren Buffet once told that interest rates are like gravity. If there is no gravitational pull on asset values, then values can be infinite. Little did Warren Buffet know that the world is heading towards a strange phenomenon called negative interest rates. This strange new world is both confusing and counter-intuitive. The common man is […]
The mega-success of social media sites is not news for anyone. Social media companies such as Facebook and Instagram have become global behemoths within a small period of time. These companies also have multi-billion dollar revenues and cash flows which reinforces their position in the market. Twitter is another social media company that is often talked about in the same breath. This means that in terms of popularity and brand value, Twitter is almost equal to companies like Facebook. However, when it comes to revenues and valuation, Twitter lags behind. This is because Twitter is still in the nascent stage.
Twitter has close to 200 million daily active users. On the other hand, companies like Facebook have 1.8 billion daily active users. Even applications like TikTok have a huge user base of 800 million active users. Twitter’s $3.5 billion in revenue is dwarfed by the $71 billion revenue produced by Facebook. It needs to be understood that Twitter has a disproportionate impact on society. Even though Twitter is much less popular as compared to social networking sites, it is used by important personalities.
Even though everyone is aware of Twitter and also uses Twitter, there are very few people who know how Twitter actually makes money. In this article, we will understand the economics behind the business model of Twitter.
Twitter is very clear about its business model. It is also extremely focused on having a lean model. Twitter does not provide users with any tools to aid in content creation. However, Twitter gives users free and unrestricted access to voice their opinions to people across the world. Twitter’s mission is to improve the ways in which a free and global conversation can take place.
Twitter is considered to be the messaging service of the internet. Since the tweets are free for users, a wide variety of discussions happen on the site. Twitter has created the world into a room full of people having conversations. The company keeps a close eye on the subjects which are becoming popular in the conversations through their trend watcher tools. Twitter also amplifies trends by broadcasting tweets to people who have an interest in similar subjects.
Twitter trends can be considered to be a representation of the real-life trends taking place across the world. This is the reason that corporations and political parties all keep a keen eye on the trends published by the website.
As mentioned above, the revenue of Twitter is less as compared to other social media giants. However, Twitter is still in the growing phase and is expected to scale up rapidly in the forthcoming years. Twitter has two main sources of generating revenue viz. advertising and data analytics. The details of both these sources have been mentioned below:
The bottom line is that the business model of Twitter is quite different as compared to other social media companies. Also, the target market and monetization techniques used by Twitter are very different.
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