Twitter is one of the most popular social media websites out there. It has been active for around 13 years, Jack Dorsey, the owner, set up the company in March 2006. Since then Twitter has changed a lot, and how people use it has changed a lot. Today Twitter is considered a voice for the public and the individual and Twitter rants have landed a lot of people in trouble, including the president of the United States, Donald Trump. It is undeniable that Twitter today has an enormous impact on people and everything in general.
With all that said, it is thought that the business model Twitter has is not good for its stockholders and that the value of the company is only getting worse and worse with time. So let’s take a look at how exactly Twitter makes money and if they should maybe change it.
Most of the money Twitter makes comes through advertising sales. The money Twitter earns every year from advertising comes in at around $400 million. Anyone can advertise on Twitter, be it a company or an individual. You can do that by making a specific tweet stand out so that everyone sees it, even people who don’t follow that person/company, you can make an entire account stand out or you can start promoting a trend, which has to do with hashtags, another thing that was born thanks to twitter.
Twitter posts have the ability to have videos or pictures attached to them so the people who are advertising can present their product in a much better and more efficient fashion and you can even preview them. Previewing is a bit of a new thing, before 2013 you had to click or tap on links in order to be able to see the content that was posted, be it a video or a picture.
Now the way Twitter makes money off of those adverts is based on how much people interact with that specific tweet, trend or account. So the more people click on it the more Twitter charges them, but of course, the amount of money that should be spent is set in advance. You can also place bids to make sure your content goes into a specific space. Nowadays, more and more of the advertising revenue comes from phones, more than 65% to be specific, and it is thought that is only going to increase from here on.
Data licensing is basically selling the data Twitter users generate by tweeting every day. That public data is called Firehose and it amounts to around 500 million tweets every day. The companies that buy this public data use it to analyze consumer trends and get a better view of how people see a specific brand or company. Of course, since this is public data everyone can see it, but, companies learn about it in detail just because of the sheer volume of the data, an individual does not have the resources nor the time to do it.
Now with this information in hand, they can make targeted ads, which in turn make sales much easier. You advertise things that people find interesting, unlike something completely random you can see on TV. In 2015 Twitter made $32.2 million from data licensing.