Step into the world of Twitter, where a single tweet can ignite revolutions and shape the course of history. With its humble beginnings, marked by Jack Dorsey's iconic "just setting up my twttr" tweet, Twitter has emerged as a powerful voice that resonates with millions.
https://twitter.com/jack/status/20?ref_src=twsrc^tfw|twcamp^tweetembed|twterm^20|twgr^86586f25daf6a8f0a8dc558f610741f2dfef1cc4|twcon^s1_&ref_url=https%3A%2F%2Fwww.feedough.com%2Fhow-does-twitter-make-money%2F
Regardless of its remarkable reputation and significant influence, Twitter faces considerable challenges. Its valuation has experienced a downward trend, and its stock performance has been lacklustre. Detractors have even labelled its business model as "broken," pointing to its inability to turn a profit.
Source: Most popular social networks worldwide as of January 2023, ranked by the number of monthly active users
Source: Twitter’s performance in comparison to its competitor Facebook
Despite being one of the early pioneers of social media, Twitter continues to struggle with revenue generation and profitability and has failed to turn a profit for eight out of the past ten years. Moreover, Twitter sits at the 14th spot in popularity (556 million MAU as of January 2023). In contrast, Facebook dominates the scene with a whopping 2.98 billion MAU. That's like a colossal fivefold difference!
Now it's facing leadership changes with Elon Musk, after striking a monumental deal worth $44 billion for the company, as the newest addition to the list.
This is not a way to make money... Having a platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. This is not about the economics at all - The world’s richest man
The acquisition triggers a chain reaction, causing Twitter's debt to soar into the stratosphere. Billions of dollars in loans are secured against the very foundation of the platform itself. Now burdened by this staggering debt, Twitter faces an uphill battle as it grapples with annual interest payments that exceed a billion dollars—more than its total profits for 2021. Talk about a rocky road to profitability!
Nonetheless, Twitter remains a private company striving to navigate the complex landscape of business. While its societal impact is undeniable, generating revenue becomes paramount for its sustainability. In this case study, we delve into the quest to monetize Twitter effectively, as previous attempts, including those under Elon Musk's leadership, have resulted in turmoil.
<aside> 💡 The business objective of this case study is to increase Twitter's revenue.
</aside>
Twitter’s revenue model can be broken down into 2 main streams: Advertising and Data Licensing
<aside> 📢 Advertising
<aside> 💰 Data Licensing
In 2022, Twitter generated total revenue of $4.4 billion, experiencing an 11% decrease compared to the previous year's earnings. Year after year, the company has witnessed negative profits, and it's clear that unless the business model undergoes significant changes or tweaks, these losses will persist.
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However, the bad news doesn't end there, the digital advertising market, which had been the primary source of revenue for Twitter, is drying up. Even industry giants like Google and Facebook are feeling the impact. Following Musk's takeover, major advertising agencies have advised their clients to halt Twitter advertising altogether. According to The New York Times, Twitter experienced a staggering 59% decline in US advertising revenue during a five-week period from April 1 to the first week of May compared to the same timeframe the previous year.
Whether due to the sudden chaos or the broader economic climate, the consequences are the same—an urgent need to make money from sources other than advertising, but what’s been proposed so far doesn’t come close to filling the gap.