How Twitter Makes Money

Advertising and data licensing are the major sources of revenue

NEWS ALERT November 29, 2021, 11:30 a.m. EST: Twitter co-founder and CEO Jack Dorsey announced he is stepping down as CEO effective immediately. He will be succeeded by chief technology officer, Parag Agrawal.

Twitter Inc. (TWTR), the social media company founded 15 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 2020.
  • Twitter suspended the account of former U.S. President Donald Trump in early January after he made tweets that the company said risked inciting violence.

Twitter's Financials

In its 2020 fiscal year (ended Dec. 31, 2020), Twitter reported a net loss of $1.1 billion, a significant change from the net income of $1.5 billion generated in 2019. Annual revenue, however, rose 7.4% to $3.7 billion for the year. The net loss in 2020 was largely due to a $1.1 billion non-cash charge related to a provision for income taxes. Also, the net income in the previous year was partly inflated by a $1.21 billion non-cash benefit from income taxes.

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 services generated $3.2 billion, or about 86%, of Twitter's revenue in 2020. The segment's revenue rose 7.1% compared to 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 2020, or $509.0 million, was from data licensing and other sources. Revenue for the segment grew 9.2% compared to the previous year. 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" include service fees Twitter collects from users of its mobile ad exchange, MoPub.

Twitter's Recent Developments

Twitter, as well as social-media rival Facebook, began adding labels to posts on their platforms over false or misleading claims about the U.S. presidential election in November 2020, including posts from former President Donald Trump. Trump and others were tweeting misleading claims about winning the election before final results had been determined. Twitter added 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.

On Jan. 8, 2021, Twitter permanently suspended Trump's account, citing the "risk of further incitement of violence." Twitter said that tweets by Trump were very likely to encourage people to carry out similar criminal acts as the ones that took place at the U.S. Capitol just days earlier.

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)      

Article Sources

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