Twitter Inc. (TWTR), the social media company founded 14 years ago, is now ubiquitous via its posts - called tweets - on the Internet and all forms of media. It's best known for news-breaking tweets from politicians and celebrities, but it provides a platform for millions of users to publish their thoughts, interact, share content, and read breaking news. The platform itself is free to use for individuals and businesses alike. Once a user has created an account, they can post messages ("tweets") of up to 280 characters and up to 2,400 times per day, which are automatically distributed to followers in a feed that is constantly refreshed.  Twitter divides its revenue into two categories: the sale of advertising services, which constitutes the vast majority of the company's revenue, as well as data licensing and other services. Twitter's major competitors include other social media companies like Facebook Inc. (FB) and Alphabet Inc. (GOOG).

Key Takeaways

  • Twitter is a social media company providing a platform for users to interact in real time.
  • The company generated the vast majority of its revenue through advertising services in Q3 2020.
  • Twitter added warning labels to certain user-posted tweets concerning misinformation about the U.S. presidential election.

Twitter's Financials

In Q3 2020 (ended September 30, 2020), Twitter generated net income of $28.7 million, down 21.5% from the same three-month period a year ago. The company posted revenue of $936.2 million, up 13.7% compared to the year-ago quarter. Twitter noted that advertisers significantly increased their spending in the third quarter. This increase is in contrast to the previous quarter, in which the impact of the COVID-19 pandemic as well as U.S. civil unrest led to significant declines in advertising revenue.

Twitter's Business Segments

Twitter has a single operating segment and reporting structure. However, in its financial reporting the company does separate its revenue into two categories: Advertising Services; and Data Licensing and Other.

Advertising Services

Advertising makes up $808.4 million, or about 86%, of Twitter's revenue as of Q3 2020. The segment's revenue rose 15.1% compared to Q3 2019. Twitter generates most of its advertising revenue by selling promoted products, including promoted tweets, promoted accounts, and promoted trends, to advertisers. The company creates tailored advertising opportunities by using an algorithm to make sure promoted products make it into the right users' timelines, "Who to Follow" lists, or at the top of the list of trending topics for an entire day in a particular country or globally. Advertisers also have the option of paying for in-stream video ads delivered to a targeted audience or sponsoring video content from publishing partners. While the majority of revenue from advertising services is generated through Twitter's owned and operated platform, a small portion of the advertising products Twitter sells are also placed on third-party publishers’ websites, applications and other offerings.

Data Licensing and Other

Nearly 14% of Twitter's revenue in Q3 2020, or $127.8 million, was from data licensing and other sources. Revenue for the segment grew 5.2% compared to the same quarter a year ago. Twitter also sells subscriptions to public data beyond its public API to companies and developers looking to "access, search and analyze historical and real-time data" on the platform. The "other sources" includes service fees Twitter collects from users of its mobile ad exchange, MoPub.

Twitter's Recent Developments

Twitter, as well as social-media rival Facebook, have been adding labels to recent posts on their platforms over false or misleading claims about the U.S. presidential election, including posts from President Donald Trump. Trump and others have tweeted misleading claims about winning the election before final results have been determined. Twitter is adding labels to inform users about the potential inaccuracy of the information contained in such tweets. Social media companies have been under increased public scrutiny in recent years over how they monitor user-posted content on their sites.

How Twitter Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Twitter and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Twitter releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Twitter discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Twitter breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

Twitter Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors          
General Management ✔ (U.S. Only)      
Employees ✔ (U.S. Only)