How does Twitter make money?

Hmm, ok. Seems like only a very small portion of their userbase actually makes use of text messaging for tweets. I guess it would be enough for a small revenue. Is that really the only revenue stream?

Twitter doesn't charge its users for the service (at least for now). It's our mobile phone companies who are making the money from our SMS usage.

In fact, Twitter pays the mobile phone companies to send us our notifications.

See also this page on Twitter's knowledgebase for more confirmation.

Ok, so that revenue source is out of the picture - which begs the question of how they continue to operate? Where is the revenue stream that I'm obviously missing here?

For a discussion on how Twitter will make money, it might help to read this blog post from Fred Wilson about Twitter's business model. Fred's VC firm invested in Twitter.

Ah, ok. So the real answer is they don't make money...yet. Thanks. At least it wasn't that I couldn't identify a revenue stream but rather that there isn't one at the moment. :)

So, I wonder which direction they are likely to take when they do decide on a business model: Ads? Subscriptions? Both? (Or likely, ads on free accounts and none on subscription accounts?)

Anyone have any thoughts on something else entirely?

Actually, if I remember right, they had a few Google ads for a little while (on individual tweet pages), but I doubt that brings in any revenue (not many people view INDIVIDUAL tweet pages, I'd think). It seems like those ads have disappeared.

Why do people care how businesses make money. Just use their free service and enjoy!

@Nor Why do people care how businesses make money? Knowledge is power. By understanding how a specific business makes money one can leverage that knowledge and apply it to one's own business, company or operation. The sharing of knowledge is how we grow as a society. One should always want more knowledge and information regardless of whether it can be applied directly to what you do. Who knows, it just might come in handy at some point down the line.

>Of course we must ask how businesses make money. What will happen when you see a business opportunity that requires an initial capital? Will you just go in? I know I'll ask myself that question.

About Twitter. It seems they still haven't introduced their business model and although everything happens without the public knowing I think they are trying to avoid the Facebook type of revenue generation. I'm so annoyed by all the ads at Facebook and this is one of the biggest reasons I don't use it.

Ideas for Twitter to make some money:

1. Twitter news distribution service for publishers
Allow people to subscribe to various channels of news spilt by countries and vertical segments. Feed people news of their choice for public news distrubition. Publishers need to pay a fee to reach potential news subscribers. Publishers today are looking for an effective way to redsitribute their content.

Publishers need special tools to see how many followed their article, time spent, whcih region etc

2. Start a sponsored twitter award program.
The best twitter page, the most followed twitter group, the most original twitter page, the most unusal twitter page, etc.

3. Start twitter Jobs
Quick daily jobs updates from placement agencies who pay to use the Twitter subscriber base.

Please let me know your comments.

Nadeem Hood
nadeem@cpidubai.com
Director - Online Services
CPI Dubai
www.cpidubai.com

Good discussion. I have just joined Twitter (June 09) but still can't see any advertising. With an alexa ranking of 38 (i.e. the 38th biggest website worldwide) they have massive traffic. Their revenue potential is...massive. As a multiple website owner, I am also curious. Where do their bucks come from??? More discussion please.
https://twitter.com/AllFamousQuotes

they could try and support it on donations, i know this is how wikipedia survives! and that's probably far more bandwidth intensive. or they could buy up all the sister sites that people use in conjuntion with twitter that are supported via advertising, this way they could have all the advertising revenue they wanted while leaving the actual twitter site as it is.

Don't underestimate the power of raw information!
As a company that craves information about what's cool, things like Google Trends is an invaluable tool for us. There are lots of information products that Twitter could do to provide an "early warning service" about things that people tweet about. We'd pay, and our customers would pay. I'd guess $10k/year X 1k customers = $10m. Covers the hosting fee, anyway! And development -- well others do that. Marketing -- the media do that for them; or virally.

Hi ppl!! useful discussion!! i read few articles which i wud like 2 share with u !!

Here is some generalized info .....

The most common way for Web sites to generate revenue is to :

1- allow companies to advertise on the site. It may be hard to believe, but A social networking site like Facebook has millions of active users. Access to that enormous user base is a valuable commodity. For that reason, advertisers might be willing to pay more for an ad on Facebook than for a comparable ad on a smaller social networking site.

2-charge a membership fee to users. While most social networking sites avoid this strategy, a few have been able to use it effectively. Many online dating sites withhold key features from users until they choose to upgrade to a premium account. For example, you might be allowed to browse for a potential match on a dating service, but you'd have to upgrade if you wanted to send your soul-mate-to-be a message.

Marketing products on Twitter is a potentially more interesting idea from a revenue perspective. Late last year, Dell reported that it had made over $1 million in revenue thanks to Twitter. More recently, Dell announced it would start offering exclusive deals to users who follow its accounts on Twitter.

But i don find many advertisements in Twitter. but heard Twitter charges for certain communities/companies to advertising their products.....

This information i read from many sites..
Hope it was useful!!
Sorry if i had bored u!

Cheers,
MINI

currently i m building application using Twitter api... so just learning how other websites are making money out of it!!!
It will be more helpful if i know its business model!!!

Cheers,
MINI

Here's a great article/interview with Biz Stone (co-founder of twitter) regarding the state of Twitter and possible revenue streams.

http://www.pbs.org/kcet/tavissmiley/a...

Sounds like they will continue to offer the service for free but expand the value of current services for businesses with things like analytics offerings, certifying your business's twitter page, optimizing your twitter account for customers. Really could be a pretty good business model...They avoid alienating users with busy ad space but can target businesses as the paying customer

this is very interesting. didnt realise that twitter wasnt making any money at the moment. so who pays the bills?

Twitter is valued by some at about $250m, which means they can raise venture capital on a share of that. In June 2008, they raised $15m over the $5m previously taken. VCs are happy to buy into a company if they think they can make a big return, though I don't know what share of the company is owned now by VCs.

In Matt's link above, they identify 50 staff, say at $150k each, plus say $5m/year server costs, so I'd guess they need about $12.5m/year to run.

So in short, they are selling a share of a future sale price to venture capitalists, and living off that money.

Source: http://www.techcrunch.com/2009/01/24/...

I didn't even know that that was possible. I learned something new today. Thanks Jeminar!

Especially in the dotcom era, but still now, people often create companies with no desire to ever make revenue. The idea is that they have a promising idea which they develop using VC money and once developed and proved they sell the idea (with code and media buzz etc) to someone who is actually able to monetize it.

They are funded by VCs who get a disproportionately large share of the company compared to the money they put in (because they take a lot of risk). It's the business equivalent of a university research grant.

The value of a company is dependent on what someone is prepared to pay. So, perhaps this question should be less about "how does twitter make money?", and more about "how could someone else make money with the twitter installed base, media buzz, technology and patents?".

It is all venture capital. Only God knows what their long-term plan is to appease their investors...

Honestly I asked myself the saem question and its just weird that they don't at least put 1 ad on each page which leads me to conspiracy theorize it was created by the Government to keep easier tabs on us and help national security because they can monitor twitter easier than phones calls and texts because now some ppl DM wat they normally would have texted, plus they can search for keywords like bomb, it is unheard of that a site so popular would not have ads or any revenue sourcae by not putting ads they are passing up easy millions

I understand what Jeminar is saying but Twitter has already proven itself, the site is actually more popular than myspace right now so for it not to be making any revenue by placing ads on its site is ridiculous

Sorry but if they had ads on their site, just 1 per page, no1 would mind and they would have a great amount of revenue, the main question is why wouldn't you put any ads when you could easily make money and not risk people not liking the sit anymore?

Wired magazine has an article this month that says Twitter will make $4 million this year.

I'm wondering where that comes from as well.

I have a very good answer for you. It is probably the best answer you will hear.
Twitter, in the begining, needed to prove to the venture capitalsts that the Twitter business model will make money in some way. They needed to prove it to get their 40 million in funding. No one would just give them 40 million to start a business with no chance of revenue. Supprisingly ads are not the number 1 revenue source budgeted for this company in my opinion. My opinion states that Twitter will go into aquisitions. This happened to MySpace, Youtube, Flickr and other startups. The goal is to popularize the site to the point that it becomes of interest to compnies like Google, Yahoo, Fox Interactive, and others. They see the popularity of the site and decide to aquire it and it adds on to their own network. After that they make their money.
Venture capitalists and startups have an agreement what is called an exit strategy, that is anywhere from 5 - 10 years in length. This enables the venture capitalist to get their money back with a certain amout made from either IPO or M & A. Twitter is not going to be IPO because IPO means Initial Public Offering (going public). This means that there will be common stock in the company and it needs to go to an exchange where shares can be bought by anybody. That will never happen with twitter unless Twitter get a lot more visitors at least 3 x what its doing now and decides to sell advertising space or charges a subscription. Cut and dry that is it. M& A is Mergers and Aquisitions and that is the more realistic outcome for Twitter. The investors need to be paid back with a profit remember that. So if the company makes 40 million, it still made nothing and owes its investors some profit, don't you agree.
This is coming from someone who has some experience with startups. I have a start up now but I would never go the rout of venture capital because they ask for way too much. They are exactly like highly educated modern day pirates. They think because they are taking a risk they can eat up all your company interest. Just look at the creators of Google. All there idea and they only got to keep 30% of their company in the end.
I hope this was helpful.

By the way it has received $155 million USD venture capital funding not $40 million USD like I stated before. Sorry for the mix up.

I just watched the Dragons' Den and They were bidding on a business that is almost exactly like Twitter except they actually have advertisements on their website, but I still don't understand how Applications like Twitter are the future of social networking. It's more like social madness. The tweets or comments left on these applications are so random. I've tried to imagine a room full of people communicating but not with one another, instead simply talking about themselves or just saying random things off the top of their head, I think this kind of thing goes on in the psychiatric hospital. Twitter isn't new, yeah the name is unique but it is essentially a chat room, such as popular ones Chatterhead, Teenspot and interactive chat rooms like Habbo Hotel, Second Life, etc. Twitter is even more primitive than these chatrooms because it has a character limit, causing it's users to write minute comments or sentence fragments and it has zero interactivity. It boasts itself as a micro-blog but how can something full of such randomness be close to anything like a blog. I've searched online to see if it generates any revenue because I can't see where it would but people have said it does through SMS messaging, which must be a very small revenue, and so many people text rather than SMS. It just seems so socially incomplete, there doesn't seem to be much of a business model and yet some people talk about it as though it's like a drug, "I can't wait to get home and twitter", people like that need to get a life. None of my friends or people I know say that, thank God, they all think it is rediculous. But can anyone shed some light as to how this broken communication madness application is the future of social networking?

have you noticed something when you search on twitter??
eg: i searched for "Microsoft" just now .. and above the search results i have
"Microsoft released Windows 7, the latest version of their operating system."
could be a potential ad
... twitter can earn a lot using these simple techniques!!.. ppl wouldn't mind either knowing such stuff and it woud serve as adverts too!!..