With over 335 million monthly active users, Twitter is not only one of the most popular social media networks, but it’s the go-to platform for networking, sharing thoughts, and learning about what’s happening around the world.
And now that Elon Musk is at the helm, Twitter has been making headlines every other day. Some of these refer to changes being made to Twitter’s business model, which leaves people wondering – how does Twitter make money nowadays?
Read on for an in-depth look into Twitter’s current business model and the CEO’s latest proposals on how to change it.
How Does Twitter Generate Revenue?
Twitter generates revenue in two ways, advertising and data licensing. The sale of advertising services is its main revenue stream and constitutes the majority of Twitter’s earnings, or around 90%, while data licensing is a secondary source. However, now that Elon Musk has officially acquired the platform, two other revenue streams have been introduced, APIs and subscription fees for the Twitter Blue feature.
Until January 1st, 2022, Twitter’s revenue included service fees from mobile ad exchange via MoPub. However, this is no longer an option as Twitter sold MoPub for $1.1 billion.
Breaking Down the Twitter Business Model
Since Twitter is a free service, it must find some means of funding to cover its data storage, bandwidth, and salary expenses. Below is a detailed description of the several revenue streams that are responsible for Twitter’s financial success.
Advertising Services
In 2022, Twitter’s advertising revenue amounted to $4 billion, noting a drop of half a billion compared to 2021. Despite this, promoted tweets and accounts, along with promotions on a trending topic, remain the three types of advertising services the company offers.
Promoted Ads
These are sponsored posts by brands, placed prominently on the user’s timeline, which now looks a bit more like TikTok in the sense that it’s divided into two feeds – a ‘for you’ page containing tweets suggested by Twitter and a ‘following’ page that only has tweets the user follows. This is to ensure that the advertised product reaches its intended audience quickly and effectively.
Twitter uses its proprietary algorithms to decide where the ads will be placed based on a user’s preferences and interests. Promoted ads aim to direct users towards particular products or services that they have a higher chance of being interested in.
Promoted Accounts
These are accounts that appear in the “Who to follow” section, which typically shows some of the most followed and best accounts on the platform. Twitter labels these accounts as ‘promoted’, and places them based on users’ interests, demographics, geo-location, and general activity on Twitter. Promoted accounts provide an amazing opportunity for advertisers to build a strong and engaged community with ease.
Promoted Trends
Distinguished as ‘promoted’, these ads are placed at the top of any list of trending topics for one day in a particular country or around the world. A single promotional trend can captivate audiences across multiple timelines and regions, making it an ideal choice for businesses seeking to increase brand visibility. The fee for using Promoted Trends is fixed and is usually on a daily basis.
One example of a trending topic is the #SuperBowl. It’s a hashtag that’s been used by more than a million users in a specific week or day as people are discussing Rhianna’s performance at the Super Bowl. By promoting this trend, any Twitter user, or business include can increase their visibility and overall audience engagement.
Data Licensing
Even though the business model of Twitter primarily relies on advertising, data licensing is an important aspect of its earnings too. In 2021, Twitter earned $571.8 million from data licensing, accounting for over 11% of its revenue.
Data licensing refers to the option to access, search, and analyze past (or historical) and real-time data that has been posted as public on Twitter. It’s an option that allows company partners to gain access to valuable data so they can gain a deeper understanding of their audiences. In doing so, they can be more successful when targeting their potential audiences with ads and products.
New Twitter Revenue Streams
Paid Access to Twitter’s APIs
Ever since the platform was acquired by Elon Musk, the billionaire has been looking for ways to boost its revenue. And as of February 9th, 2023, Twitter announced that they will no longer be supporting access to the platform’s API. In simple terms, this means that all interactions between Twitter and other platforms will be available for a certain fee or, as the company announced, ‘a paid basic tier’.
Twitter Blue Subscription Fees
These have been recently added to the Twitter revenue streams and refer to the fees paid by subscribers for a feature that adds a blue checkmark to their Twitter accounts, enabling them early access to select features like editing tweets. Pricing is localized and currently starts at $8 a month for US users or $84 per year, while iOS and Android monthly pricing is $11 or $114.99 a year.
How Profitable Is Twitter?
Twitter is not profitable despite the fact that it’s one of the most influential platforms in the world. In Q2 of 2022, Twitter had a net loss of $270 million. This represents a more than significant decrease from a net income of $513 million in Q1 of 2022.So regardless of how fantastic Musk’s announcements that he will increase average revenue per user by $5.39 may seem, it appears they may be the only hope for Twitter. And even though most of the changes Musk has introduced so far have been accepted with controversies, we are yet to see whether his alterations to Twitter’s business model will bear fruit.