How Does Twitter Make Money: An Explanation

how does twitter make money

With millions of active members throughout the world, Twitter is one of the most preferred social media channels. 

While it allows users to interact with others, exchange ideas, and keep up with news and trends, it’s also a successful enterprise that brings in a sizable amount of money. However, have you ever wondered how does Twitter make money? 

We will explore Twitter’s revenue streams and examine how it has transformed into a highly advanced advertising and marketing platform, offering companies diverse advertising alternatives for promoting their brands.

By the end of this article, you’ll have a better understanding of:

  • Twitter financial basics and how much is Twitter worth?
  • How does Twitter make money
  • Twitter’s competition

Let’s get started!

Twitter Financial Basics – How Much Is Twitter Worth?

If you are interested in learning about the financial basics of Twitter, then read on to know how much Twitter is actually worth.

Whether you’re a curious investor or simply interested in social media finance, below you will explore the value of Twitter and break down the various factors that contribute to its market capitalization.

The market value of Twitter in 2022: $31.34 billion

Market capitalization, or market cap for short, is the sum of all a firm’s shares that investors use to determine the value of a company.

Fun Fact: As of August 3, 2022, Twitter’s market value was $31.34 billion.

The value of Twitter is $13.316 billion.

Market capitalization gives investors a sense of how valuable a company is. Still, there is a catch: market prices fluctuate day by day, so a bad trading day could affect the company’s valuation.

However, the GOBankingRates evaluation of a company’s net worth considers factors like full-year revenue and profit. The final value is more conservative but is based on actual data. Twitter is worth $13.316 billion based on its three-year sales and profit totals.

How Does Twitter Make Money?

Twitter has a single reporting structure and operating unit. However, the corporation does divide its revenue into two categories in its financial reporting: advertising services and data licensing.

Advertising

About 89% of Twitter’s $4.5 billion income in 2021 came from advertising services. Revenue for the segment increased by 40.5% from 2020. The majority of Twitter’s advertising income comes from offering advertisers promoted goods, including:

  • Promoted Ads
  • Twitter Amplify
  • Follower Ads
  • Twitter Takeover Ads

The business uses an algorithm to provide personalized advertising chances by ensuring that advertised products appear in the timelines, search results, profile pages, and Tweet conversations of the appropriate users.

Advertisers can choose an audience based on a variety of factors. Twitter offers tools for marketers to develop and create a following of people interested in the goods or services they sell. 

Additionally, advertisers can purchase advertising that will appear at the top of the timeline or list popular topics.

Although Twitter owns and operates its platform, which accounts for the majority of revenue from advertising services, some of the advertising products Twitter offers are also displayed on the websites, mobile apps, and other products of third-party publishers.

It might interest you: Your User-Friendly Guide to Twitter Analytics

Data Licensing

Data licensing and services account for the remaining 11% of Twitter’s total revenue. In 2021, this segment generated around $571.8 million, with a growth rate of 12.3% compared to the previous year. Although the increase was more gradual than in previous years, it still contributed to Twitter’s overall revenue growth.

This source of income is derived from software developers and other companies’ subscription fees. The information gives them access to demographic and historical user trends.

Evolving Methods

Because Elon Musk intends to charge $7.99 per month for verification services, Twitter Blue has become a hot topic in the media. Only trustworthy accounts that make payments will be marked with a blue checkmark.

They used to checkmark the accounts of famous people. If this approach is effective, it may open up a brand-new, untapped revenue stream for the business.

Twitter’s Competition

One reason Twitter struggles to make money is that it competes with much larger companies for advertising dollars. For example, Facebook is much bigger. In 2021 its revenue for parent company Meta Platforms (META) is nearly $118 billion, a multiple of Twitter’s revenue.

Similarly, Alphabet, the parent company of Google and YouTube, reached nearly $258 billion in revenue.

Other social media companies such as Instagram, Snapchat, TikTok, and Pinterest compete for advertising dollars. Snapchat was founded later than Twitter and is growing rapidly, reaching just over $4.1 billion in revenue in 2021. Pinterest is also growing faster than Twitter.

Companies such as Amazon.com and Microsoft also play a large role in regular online advertising revenue, although they are not on social media. However, Microsoft-owned LinkedIn is a multi-billion dollar business in the social media market.

The bottom line is that the competition is crowded, and Twitter is a relatively small player, making it difficult to generate revenue consistently and remain profitable. In addition, other social media channels are growing rapidly.

Advertisers looking for the best value for money are advised to look beyond Twitter due to its relatively small size. Some fun facts:

  • Facebook has about 3 billion users.
  • YouTube has more than 2.5 billion users.
  • Instagram has about 1.5 billion users.

Even TikTok, Snapchat, and Pinterest are big. Advertisers can therefore choose Twitter alternatives as they can reach a more meaningful audience.

Key Takeaways

After analyzing the various revenue streams of Twitter, we can conclude that:

  • Twitter makes money mainly from advertising to its users through promoted tweets, accounts, and trends.
  • Additionally, the company earns revenue from data licensing and services for businesses and developers who use its platform.
  • Twitter is exploring new ways to make money, including e-commerce, subscription services, etc.
  • Twitter’s revenue streams are challenged by competition from other social media platforms.
  • Despite slower revenue growth than other social media platforms, Twitter has remained profitable by managing costs and resources efficiently.

Were you surprised by any of these Twitter statistics? Did you gain any new knowledge today?

Share your thoughts in the comments section.

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