MSG Team's other articles

12273 Advantages and Limitations of a Budget

In the previous article, we learned about the three financial statements. We also learned how income statements and balance sheets are backward-looking financial statements. We also understood that the budget is the only forward-looking financial statement in the personal finance domain. It is the only statement that can be used to prevent economic mistakes from […]

10096 Keep It Simple Securities (KISS)

In the previous article, we have studied about the concept of Simple Agreement for Future Equities (SAFE). However, it is important to note that SAFE is not the only innovative type of financial instrument which has been created for funding startup companies. Another type of financial instrument called Keep It Simple Securities (KISS) has also […]

9638 How Investment Banks Source Deals?

Investment bankers are intermediaries in the capital-raising process. This means that most of the time, the deals which go through are not pitched by either party but by the intermediaries i.e., investment bankers. Since sourcing a deal is the first step that an investment bank can take towards the generation of revenue, investment banks have […]

10033 Investment Banks and Governments

Governments all over the world regularly engage in high-value financial transactions. They often need the help of experts in order to do so. Since investment banks have a lot of experience in mediating high-value transactions, they are often appointed by the governments to be their advisors on these matters. In this article, we will have […]

12872 The Consequences of Negative Interest Rates

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 […]

Search with tags

  • No tags available.

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.

The Twitter Mission

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.

Twitter Logo

How Twitter Makes Money?

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:

  • Like other social media companies, advertising is the biggest source of revenue for Twitter as well. Twitter generates close to 87% of its revenue from advertising.

  • Twitter suggests various accounts to users depending upon their previous activity. Now, there are certain people or companies who want to gain followers faster. Hence, these companies pay Twitter to promote their accounts. These accounts appear at the top of the list when Twitter gives suggestions to users. Promoted accounts help Twitter receive money on a pay-per-click basis. Twitter receives money each time someone clicks on these accounts regardless of whether they follow the account or not.

  • Twitter trends become very popular on social media. They are followed by millions of people. This is why companies are always on the lookout to take advantage of these trends. Whenever companies witness the rise of a certain trend, they contact Twitter to promote their products by associating them with the trend in some manner.

  • Twitter also helps companies and political parties shape opinions. This is because they provide a promoted tweet story wherein Twitter charges money from its users in order to ensure a higher degree of popularity to its users.

  • Apart from advertising, data licensing is another important source of revenue for Twitter. Right now, it only accounts for a minuscule portion of the overall revenue. However, it is expected to increase at a rapid speed in the forthcoming years.

  • Twitter has more than 200 million active users. Twitter generates data about their daily user activity. Twitter then shares this data with other companies in return for a fee. Twitter sells APIs to other companies which allows them to query Twitter’s database to uncover past and present trends. Subscribers have access to real-time analytics and dashboards created by Twitter. This helps them better take advantage of trends by creating and running campaigns both on and off Twitter.

  • Twitter has also decided to enter the mobile applications space. It is creating a platform called MoPub which is still in the early stages. However, Twitter has been able to monetize MoPub to augment its revenues. This platform is expected to be a big source of revenue for Twitter in the forthcoming years.

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.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Convertible Notes and Startup Funding

MSG Team

Cash Burn Rate: The Basics

MSG Team