Twitter Business Model – Learn How They Make Money
Jack Dorsey, the founder of Twitter, posted the first ever tweet on 22nd of March, 2006. The tweet was pretty simple and only contained 24 characters (if we include spaces). Back then, it was the start of a new social media platform which now caters to 321 million active users as of 2018. Over the 13 year period, the social media platform has evolved. Twitter business model saw new additions too. After getting launched in July of 2006, the microblogging website has become popular among celebrities and masses.
The year 2013 saw Twitter become one of ten most visited websites on the internet. Moreover, it got called the ‘SMS of Internet’ as well. Originally, Twitter users were limited to 140 characters for their tweets. However, the character length was increased to 280 characters for non-Asian languages in November 2017.
Twitter has become the voice of many users worldwide. Notably, many celebrities or political figures use the social media platform to stay in touch with their followers and supporters. For example, political figures such as Donald Trump, the President of United States of America, Imran Khan, the Prime Minister of Pakistan, are some of the many politicians that are active on Twitter.
The American microblogging platform has started numerous trends online and have also helped to commence different movements. #MeToo movement was brought to life again when Alyssa Milano took to Twitter to accuse Harvey Weinstein of predatory behavior.
What is the Twitter Business Model?
Twitter enjoys prominence and is known for the value it provides to its users. However, Twitter has been known for having a revenue model that has not been changed in many years. This is alarming because Twitter’s valuation has taken a slump and is going downhill with time. The performance of its shares has been sub-par as well. So, you might be wondering how Twitter sustains itself.
People at Twitter are still at work, trying to make Twitter profitable. However, the likes of people at Forbes believe that Twitter’s business model is ‘broken’. This will probably raise lots of questions in your head. You should not worry because we have got you covered.
With more than 328 million active users on Twitter, it sits as the ninth largest social media network in the world. Time has shown that Twitter is one of the largest source of breaking news around the world. The app and website make it easy to post new, rapid updates.
However, it is concerning how Twitter is still behind Facebook, WhatsApp, Snapchat, and Instagram when it comes to number of total users on the platform. Largely, the valuation of Twitter depends on the numbers of users and engagement between the users. Hence, the valuation of the company took a dip when the growth of number of users stunted.
Twitter vs Facebook
During the early years of Twitter, it was seen as a direct competitor of Facebook. While the two social media networking platforms were different in nature, their similarities meant that they were often compared. Twitter failed to keep up with Facebook as time passed.
Facebook captured the majority of the market over the next few years. Currently, Facebook is the most popular social media network in the world. With over 2 billion users worldwide, Facebook is valued at a whopping US$ 485 billion.
To make things worse, the valuation of Twitter dropped to US$ 15 billion recently. That is US$ 3 billion lesser than the valuation of the company at the commencement of its IPO.
More Details on the Business Model
Twitter shares a business model that is similar to other social media networks. The users create a profile on Twitter that allows them to post tweets and follow other users on Twitter. The tweets cannot be longer than 280 characters.
You need to have a Twitter profile if you want to read and post tweets. Unregistered users can only view tweets. The Twitter profile allows the user to post images, videos, and various links through their account. It also has a direct message feature baked in for users.
Twitter has changed their strategy recently. They are promoting content creators who post more videos on Twitter. Statistics have proven that videos drive up the engagement of a tweet. In fact, videos witness greater engagement than text or image-based tweets. To get more content creators to make videos, Twitter offers the content creators to share the revenue generated by the videos. User receives 70% of the generated revenue, while the remaining goes to Twitter.
Twitter offers a better rate than YouTube, which gives just about 55% revenue of a video posted on YouTube. This incentive is enticing.
Twitter acquired Periscope to throw live-streaming into the business. Furthermore, they bought digital rights to NFL in 2016 for US$10 million. Twitter tries to get exclusive digital rights to other similar events such as the NFL for its business model.
How Does the Twitter Business Model Make Money?
Twitter makes money through two ways: advertising and data licensing. According to Twitter, about 85% of the revenue comes from different advertisements. Advertising options at Twitter includes promotion of tweets, user accounts, and particular trends or hashtags.
Twitter charges its clients. This rate is dependent of on the amount of engagement that a tweet generates. You can either set a budget at the beginning of the ad campaign or charge the advertisers depending on the number of clicks or retweets.
Twitter sells its public data to different companies around the world through ‘Firehose’. Twitter forwards 500 million tweets to different companies around the world daily. Companies use public data to analyse the consumer trends and generate the response of users’ regarding different brands and events.
The volume of data helps to reach good conclusions. The companies can get detailed information about their users through these services. However, sophisticated analytical tools and algorithms will be needed to be used to get hold of the crucial information.