Twitter Revenue Model

Leave a comment

May 18, 2014 by Ozgur Ozden

Before we discuss the tweeter revenue model, I would like to briefly mention about the history of twitter and its evaluation. Whole story started by an idea from the founder Jack Dorsey to create an SMS like system in 2006 where you send a message and this message is displayed to all your friends. it was initially named as “twttr” but in time name evolved to “Twitter” as we used today by Noah Glass.

The Twitter we have used today is basically messaging system with 140 characters. It has this limit because it has established as an SMS like messaging system and still we have this limit today. According to  Laudon & Traver (2013) in 2012 Twitter has about 340 million users but having difficulties to raise money for example in 2011 Twitter raised money around 140 Million but zero profit. The reason for this is that they do not have a properly implemented revenue model to have some profit. Twitter started to work on this issue and implemented a new revenue model.

According to Shontell (2013) Twitter’s profit, revenue comes from three different source.

1- Promoted tweets: Companies pay Twitter to embed, insert their tweets into user tweets. They may target a specific keyword, specific location, televison, and interests. Twitter gets its share when users interact with the tweet.

2- Promoted trends: Twitter prepares a ranking of widely mentioned and “trending topics” depending on the location. Companies may pay to create their own trends and can be listed at the top of the list and clearly marked as “Promoted” on the left side of the user’s home timeline.
3- Promoted accounts: İf an advertiser would like to have more followers, they can have an account and this account can be suggested to followers. In addition to the above source of revenues, Twitter also makes money by sharing his tweets by Yahoo, Microsoft and Google so Tweets can be seen on major search engines.
Fig. 1. Go straight to the top of the list.[Online] At: https://business.twitter.com/products/promoted-trends [Accessed on 7.3.2014].

 

Promoted trends can be used in various ways to to advertise your company. Main idea here is to companies to pay for the advertisement to embed their own topics into the trending list or increase the ranking of the topic in the list so people can start talking and spread the words about it. Musil (2013) reports that cost per day for using Promoted Trends is increased by 33% and reached to $200K as of today. Promoted trends almost produces 10% of the Twitters total revenue. Some of the advantages of using Promoted Trends for your company might be:

  • İf you have new book or movie coming up soon, you can use trending topics to create some attention before the release. People and users will mention about the topic and you will be able to reach whole twitter users.
  • İf you have a new product on the market or brand new invention to be released again you can use this type of advertising to increase awareness.
  • You can start either online or offline promotions and events.
  • Spread important announcements about your company
  • İnitiate a conversion about a topic of your choice
  • When you send a tweet to your followers only your followers can see it. But in Promoted Trends you may set a keyword and whoever search this keyword can see your topic. This increases the amount of users reached.

As we can see promoted trends are very effective and capable of reaching many users such as around 25M users in the States in a very short period of time but costly compare to others means of advertising.

References:

1- Laudon, K.C, Traver, G.C.,  (2013, p322), E-Commerce 2013 Business.technology.society., Newyork, 9th edition, Pearson Education Limited

2-Shontell, A.. (2013). The Three Main Sources Of Twitter’s ~ $600 Million Revenue. Available: http://www.businessinsider.com/how-twitter-makes-money-2013-9#ixzz2vBW1FMmQ. Last accessed 6.3.2014.

3- Musil, S., (2013) Twitter bumps the price of Promoted Trends to $200K,  Available: http://news.cnet.com/8301-1023_3-57568628-93/twitter-bumps-the-price-of-promoted-trends-to-$200k/ last accessed at: 7.3.2014

4- Fig. 1. Go straight to the top of the list. Available at: https://business.twitter.com/products/promoted-trends,Last Accessed at: 7.3.2014.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: