How Twitter Makes Money

Susan Kelly Updated on Aug 01, 2022

Founded in 2006, Twitter (TWTR) is already a household name thanks to its tweets, which appear on the Internet and in all forms of media. Aside from politicians and celebrities, millions worldwide use Twitter to post their ideas, interact, share content, and keep up with the latest developments. Individuals and corporations alike can utilize the site for free.

Posting messages ("tweets") of up to 280 letters and as many as 2,400 times per day is possible for users who have created an account. These messages are automatically delivered to followers in a continually refreshed feed.

Revenue from advertising accounts for the vast bulk of Twitter's revenue, and data licensing and other services are the company's other revenue streams.

Several prominent social media businesses compete with Twitter. These include Facebook parent company Meta Platforms Inc., Google parent Alphabet Inc., and Snap Inc.

Twitter's Financials

Twitter released its FY 2021 financial figures in February, covering the period from January 1 to December 31. Last year, the company's net loss decreased from $1.1 billion to $221.4 million. There was a 36.6 percent year-over-year increase in revenue to $5.1 billion. One-time, litigation-related costs of $765.7 million contributed to Twitter's increased expenditures.

Most of Twitter's revenue comes from selling ad space on its platform to large, international corporations. A broad and expanding user base is required to draw in advertising. On any given day, Twitter records the total number of accounts registered in and utilizing the service. This metric is known as "monetizable daily active users" (mDAU). In the fourth quarter of FY 2021, Twitter's average monthly active user (mDAU) increased by nearly 13 percent year-over-year to 217 million.

Twitter's Business Segments

However, the corporation segregates its revenue into two groups in its financial reporting: advertising services and data licensing.

Advertising Services

About 89% of Twitter's revenue in the fiscal year 2021 came from advertising services. Relative to FY 2020, income for this division increased by 40.5 percent!

Promoted goods, such as Promoted Ads, Twitter Amplify, and Follower Ads, are sold to advertisers by Twitter to produce the majority of its advertising revenue.

The company uses an algorithm to ensure that advertised products appear in the right people's timelines, search results, profiles, and Tweet conversations. Using a variety of variables, advertisers can narrow their focus to a specific group of people. Advertisers can use Twitter to establish and grow an audience interested in their products and services. Advertisers can also pay to display their adverts at the top of the list or timeline of popular topics.

It's important to note, however, that Twitter earns a small amount of its advertising revenue from third-party publishers' applications, websites, and other goods, as well as from its platform.

Data Licensing

A total of $571.8 million in revenue from data licensing and other sources accounted for almost 11% of Twitter's total revenue for the fiscal year 2021. Compared to the previous year, revenue for this division increased by 12.3%.

Data licenses are also available from Twitter, allowing third parties to access and analyze the company's platform's historical and real-time data. Fees collected by Twitter's mobile ad exchange, MoPub, are included in "other sources." After Twitter sold off its MoPub division on January 1, 2022, the deal was finalized.

Twitter's Recent Developments

For $44 billion, on April 25, 2022, Twitter announced that Elon Musk, the CEO of Tesla Inc., would buy Twitter... The corporation is slated to close in 2022 and will, after that, be owned by its employees and investors. A total of $54.20 will be paid out to all Twitter stockholders. At the beginning of April, Musk revealed that he possessed a 9.2 percent investment in Twitter.

Tesla CEO Elon Musk was nominated to Twitter's board of directors on April 4, but Musk then indicated his intention to buy the firm and then resigned from the board. On April 14, the billionaire made a $43 billion bid to buy Twitter from the company.

On April 15, Twitter's board voted to implement a "poison pill," a limited-term shareholder rights plan, in an apparent effort to thwart a purchase by Tesla CEO Elon Musk.

But on April 25, the board of directors changed its mind and agreed to take Musk up on his offer. Twitter's stockholders must consent to the deal, and regulatory approval is pending.

Twitter completed the sale of MoPub on January 1, 2022, as previously stated. AppLovin Corp. paid less than $1.1 billion for the mobile ad exchange platform. Advanced Bidding, MoPub's network mediation, and Marketplace services will be discontinued by Twitter on March 31, 2022, according to the company.