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!!..

Actually, when something BIG happens, people post it on Twitter. So Twitter gets the info much earlier than Google does, because Twitter is real time info whereas Google needs to crawl the news websites, etc. So currently, Twitter and Google have entered into a partnership to share data seamlessly. So Twitter gets its revenue from there.

People pay for texts, if you text it in, and there's a lot of different Applications for iPhones and Ipods and even cellphones.
And texts are twenty cents, Apps are about two or three dollars each, and millions of people text and buy apps, so I think that's how they make money.
:)

Andy1: loving your analogy to millions of people in a room not talking in conversation, but talking out loud. It's perfect. However, the difference is that peoples ears can be so finely tuned that you can make sense of the cacophony.

Who are the pirates the VCs who take the risk and fund non-revenue generating ideas like twitter or the EXEC team at twitter that take the big buks in salaries and bonuses from the VCs to make their dreams come true?

Why do people think they are making money from the text messages. The cell phone companies make money from the messages. If I had to guess, they will make money down the road from a fee base service. If they charge just $1 a YEAR per person, think of how much they will make. That's right. MILLIONS A YEAR if they charge just 1 measly dollar a year per person

Shah:

1. they would need billions
2. it doesn't matter what you charge, less than 5% will EVER enter in payment details of any description

Great discussion here! I was actually just doing a google search for an article I'm writing to see if I could find out how much Twitter costs to run per month, it must be huge.

Quote Andy1:
"I think this kind of thing goes on in the psychiatric hospital"

too - funny! Twitter is kinda crazyness isn't it?!

Angela Wills, Business Lifestyle Designer
Internet Business Blog

Ok, I Just learned this. But you now those applications that twitter has?
aka twitpic.com twitterfeed.com
i noticed twitpic has ads on it. (when you log in) and i guess they make enough money from it.And i think twitter owns twitpic
b'cause twitter has been around since 2001.http://web.archive.org/web/*/http://t...
that's my proof.
but, i believe that in the mean time untill twitter caught on, they just developed aps, and on a few of them put ads.

This is so cool he started this discussion a year ago and we are still talking about today!

Zachariah -- that's great thinking, but I don't think twitter does own any of the apps. Twitpic Inc is run by someone called Noah Everett from Charleston, SC. Twitter was set up by Biz Stone in San Francisco, CA, and whose CEO is/was Jack Dorsey. Twitter was a spin off from Obvious Corp, but that's just a technicality; it was just a 'home' for Biz and his team as they wrote twitter. (see http://blog.obvious.com/).

Oh, and Fencerboy; it is cool because the internet allows for amazing business models which somehow pay for things when noone seems to pay anything. Understanding this magic might, possibly, allow us to recreate it for ourselves.

It's Zachariah's thinking that could be the mechanism; which is why I love his thinking.

haha so true

Twitters business model must be about selling the usage data to determine patterns but also some advertising to all tweets. they have a huge database of email addresses and data patterns for those emails and that is about it. I predict they will add a "Drink Coke" or "Drive a Ford" to the end of each one of the millions of tweets and sell that space to the advertiser OR let you pay $10/year to not have the 3 word ad on the end of your tweet.

Bob Sanregret, I must agree, thats the only way I can see that any company can make a profit, or any revenue, is by selling something. In this case, it must be a database of content, or statistical information. Maybe not so much email addresses, check the privacy policy for that. But it provides a statistical approach to understanding user bases. What teens like, what they don't like. What adults like, and so on. What are people willing to make public... Like "drinking a dr. pepper" a stupid tweet, but clearly a statistical point to the fact that X% of people like a product... and they can use that to figure a real good solid number to show interest in a product, service, or other topic of interest (TV, Movies, Brand Recognition, or other Interests)

From their privacy policy:
"Non-Private or Non-Personal Information: We may share or disclose your non-private, aggregated or otherwise non-personal information, such as your public Tweets or the number of users who clicked on a particular link (even if only one did)."

Clearly the statement that proves they sell what you tweet, who clicks on your links, where your links go, and all statistical relevance of it all. As a statistic, not personal information or non-public information about yourself. Email, phone, dogs name, etc. Unless you have tweeted about it.

As I see you are dealing with statistical research: I have put one of the most comprehensive link lists for hundreds of thousands of statistical sources and indicators on my blog: Statistics Reference List. And what I find most fascinating is how data can be visualised nowadays with the graphical computing power of modern PCs, as in many of the dozens of examples in these Data Visualisation References. If you miss anything that I might be able to find for you or if you yourself want to share a resource, please leave a comment.

To summarize from what I just read above, following can be the revenue generation possibilities:

1) Advertisements
2) Charging for Statistical Data Sharing
3) Charging specific members or all of them
4) Venture Capitalists funding (but this type of revenue will be short lived as no VC will continue to invest in the company if its not making any profits)

or for twitter owners its like "I don't care about the money as long as I am famous"

Giri, you're correct.
90% of the time, unless you have someone who really has a crap load of money and doesn't care what you're doing with it you'll never see #4. Any VC would require you plan out how you will make them money back, respectfully within a period of time.

The only other way you'll see #4, is someone doing the project on their own, while having a day job, they are their own VC. Which will most likely fail, due to the inability to manage time and work flow from both jobs. I certainly can't seem to do it myself. And if they are trying to start this second business for money, not just fame, they are probably short handed on funds already, which makes it harder.

Giri, there is also one way that you didn't mention that Wikipedia.org does.
Many web sites do this also, not to the full extent. But if you can register your company as a 501 Tax Exempt, Non Profit organization, you can get donations as your primary source of income, generally asking the donation from the end user.
In 08/09 fund raising efforts Wikipedia racked up over $6 million. And they are registered as a 501(c)(3) company. Tax exempt, non-profit.
Other tax exempt companies in this field can be Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations

This may help disseminate Biz Stone's intents for turning profits - Below is an exerpt from an interview had on Tavis Smiley as of Aug. 2009:

"Biz: ....So we actually need to start showing signs of life from a revenue perspective this year, so we'll begin to do that by interacting with the many commercial accounts that have already popped up on Twitter.

So Twitter, you can't think of it like a social network. It's not about are you a friend of mine, yes, no. It's about millions of millions of different sources of information that you choose to curate and follow.

Tavis: But when you say interacting with those commercial interests to show a revenue stream this year, does that mean advertisements?

Stone: Doesn't mean advertisement. What it means is you have companies like Whole Foods, you have companies like Best Buy, you have companies like JetBlue and Comcast - they're all using Twitter. And you also have very small businesses, like a cookie shop in New York City that I walked into and I saw a sign, they said, "Follow us on Twitter, we'll tell you when the cookies come out of the oven warm, you can run over and get them."

And for them, that's great - everyone runs over, buys all their cookies. They can go home. So from small businesses to big, people are using Twitter, and they're using it to raise the bottom line. And we think that because they're getting value out of Twitter we want to follow that value. How can we offer even more value?

So Twitter will remain free for everyone, but we may be able to offer an additional layer of value to some of these commercial accounts, whether it's through analytics - how can I Twitter better - or whether it's through some kind of certification - how can we make sure everyone knows this is definitely JetBlue and not someone pretending to be JetBlue?

So a variety of different features that would have some sort of paid level to them, and that's how we'll begin to have relationships with these commercial entities. And that's just phase one and then we build from there and we iterate from there, as we have been doing with the product itself."

Hope this was helpful!

@flibbertigibbet007

From what I have read "Twitter began in a "daylong brainstorming session" that was held by board members of the pod casting company Odeo in an attempt to break a creative slump."

My personal view is that board members of any Money making company will never rely on the revenue earned from donations, given the complications involved in enjoying the benefits from charity. A private jet ride in a self owned plane is much comfortable compared to a ride in an economy class of a government plane. So the option of generating revenue from donations seems unlikely (But you never know).

The interview posted by Kristen confirms my 3rd point. Additionally one more way of revenue generation for twitter is to partner with mobile carrier companies. But as of now looks like twitter is focusing more on brand building to increase their value for money ratio.

Giri, I agree with your points. I was only making a general conception of how companies do/can make money.
By the way, being a charitable organization doesn't mean you can't own your own plane. It just means, you must prove you made no money that year, non-profit, as long as you spend the millions you got from donations on anything that year, you're good in the governments eyes. (wikipedia, 6 million? how many planes can that buy?) You do of course have to publicly report where everything was spent. So if wikipedia buys a plane or two, someone would be aware, and I'm sure someone would make a stink about it.
As for my suspicion on how twitter is making money right now, other than they aren't, I'm going based upon what they are obligated to state, in their privacy policy. (maybe they aren't obligated to state a privacy policy)...
Anyway, it does state that analytical data about you may be used, which means it's probably, or more than likely being sold.
Where you may never know the truth... who is really doing what, behind closed doors. I may be a little paranoid when it comes to things behind the scenes like that, but knowing what I know, from the places I have worked. What you are told to your face, and what you have to dig up (or end up finding out), are two completely different things. So I won't take one person saying "we're not making money" any where near truthful. I can't seem to live without money, how can they?
(and back to my other post) A venture capitalist will only put money out for so long, and normally they require a good concept of how they will make their money back before even considering investing, otherwise, a fool and his money will soon be parted.

If they truly are working on brand building, and going to make a revenue model via businesses that use twitter for their own advertising schemes. They had better make their move now! They are at a crucial point, where their branding has hit the highest it can go, and if they wait too long, twitter will just be another fad. Like, what was that website... space, my... something? Either way, I use facebook now. Which feel free to add me as a friend on. Search for my username above @hotmail.com for my email.

My point there, is the next company to make a twitter like device, that may be used even better, with better tools, and a cleaner interface, may already be in the works, and take over twitters fan base by storm... or not. It may just fade out, and we'll look back and say, twitter, that *was* cool back in 2010! And everyone will get on with their lives.