Twitter is a social media company founded in 2006. An important asset is the fact that unlike other social media platforms, there is a chracater limit of 280 characters for a tweet. Twitter can also be used as an alternative media platform for the distribution of news, videos and pictures. You might wonder how a social media platform like Twitter, which requires a free sign up, would create revenue. With reference to the business model as well as Twitter’s business strategy, we will find out.
Twitter’s business model consists of key functions like selling, marketing, service, and product development decline as the company grows even as a higher proportion of customers renew and deepen their ties to the startup (Forbes, 2019).
Regarding the value proposition, Twitter offers its various stakeholders the following benefits (Feedough.com,2019):
- User Benefits – Users share content with the world, get real-time and relevant content in return and also get to participate in conversations with people through tweets or messages.
- Advertiser Benefits – Viral global reach, unique ad formats, real-time connect with the audience.
- Data Partner Benefits – Access, search and analyze data and generate insights to monetize.
The company’s revenue totaled $787 million in the first quarter of 2019, an increase of 18% year-over-year. It also saw a 11% year-over-year growth in monetizable daily active usage during this period (Investopedia, 2019).
The reasoning as to how Twitter was able to reach such high revenue is due to the following:
- Advertising – Approximately 86 percent of total revenue comes from Advertisement.
- Promotional Tweets – The point is to get more viewers and allow them to explore different ad campaigns in order for them to be marketed at an accelerated pace especially if they can go viral.
- Promoted Accounts – he more followers they receive, the more they grow in popularity.
- Promoted Trends – One viral tweet a day can cost 250,000 dollars in the US market.
- Data Licensing revenue – There are two ways Twitter uses data licensing revenue:
- One is by offering data licenses and products that enable their partners to search and access historical and real-time data on their platform and analyze them accordingly. Their analysis also includes which data comprises Public Tweets.
- The second method is by utilizing their MoPub exchange to provide mobile advertising exchange services. Twitter’s data partners operate for a fixed period when purchasing data licenses to access all or a part of their data.
- Firehose – Firehose offers twitter another alternative to gain more earnings. However, these services are limited to chosen companies and businesses. Owing to its system, twitter shares six hundred million tweets every day to such companies.
- Search Engine: Search Engine has become a vital element in Twitter’s money-making operation. Twitter charges enable the search engine to display their streaming search results and in turn charges them for the entire process.
Twitter has held long term partnerships with Yahoo! and Bing which is why it was considered a major competitor to Facebook’s online hegemony in the social media landscape (Business Strategy Hub, 2019)
References:
Forbes.com. (2019). Scalable Business Model Is Best Reason Twitter Stock Could Double. [online] Available at: https://www.forbes.com/sites/petercohan/2019/04/23/scalable-business-model-is-best-reason-twitter-stock-could-double/#60fac80b1e26 [Accessed 2 Dec. 2019].
Feedough.com (2019). How does Twitter Make Money? Twitter Business Model | Feedough. [online] Available at: https://www.feedough.com/how-does-twitter-make-money/ [Accessed 2 Dec. 2019].
Business Strategy Hub. (2019). Twitter Business Model | How Does Twitter Make Money? | Business Strategy Hub. [online] Available at: https://bstrategyhub.com/twitter-business-model-how-does-twitter-make-money/ [Accessed 2 Dec. 2019].
Investopedia. (2019). How Does Twitter Make Money?. [online] Available at: https://www.investopedia.com/ask/answers/120114/how-does-twitter-twtr-make-money.asp [Accessed 2 Dec. 2019].
