Breakdown of Its Revenue Structure and Challenges.
The structure of Twitter ad revenue:
Twitter, or X as it is now called, is one of the most popular social media platforms in the world, with over 500 million monthly active users. But how does it make money from its vast user base? The answer is mainly through advertising, which accounts for more than 90% of its total revenue. In this article, we will explore the structure of Twitter’s ad revenue, how it has changed over the years, and what challenges it faces in the future.
Twitter’s ad revenue structure
Twitter’s ad revenue can be divided into two categories: owned and operated and non-owned and operated. Revenue comes from ads that are displayed on Twitter’s own website and app, while non-revenue comes from ads that are displayed on third-party websites and apps that use Twitter’s data and content.
According to Twitter’s annual report for 2022, revenue accounted for 86% of its total ad revenue, while non-revenue accounted for 14%. revenue grew by 7% year-over-year, while non-revenue declined by 23%. The decline in non-revenue was mainly due to the impact of Apple’s iOS 14 privacy changes, which made it harder for advertisers to track and target users across different apps.
Twitter’s revenue can be further broken down into three types of ads: promoted tweets, promoted accounts, and promoted trends. Promoted tweets are regular tweets that advertisers pay to display to a targeted audience. Promoted accounts are suggestions for users to follow certain advertisers. Promoted trends are hashtags that advertisers pay to appear at the top of the trending topics list.
According to Twitter’s annual report for 2022, promoted tweets accounted for 89% of its revenue, while promoted accounts and promoted trends accounted for 6% and 5%, respectively. Promoted tweets grew by 9% year-over-year, while promoted accounts and promoted trends declined by 4% and 8%, respectively. The growth in promoted tweets was driven by higher demand from large brand advertisers, especially in the US.
Twitter’s ad revenue challenges
Despite its growth in O&O revenue, Twitter faces several challenges in maintaining and increasing its ad revenue in the future. Some of these challenges are:
- Competition: Twitter competes with other social media platforms, such as Facebook, Instagram, YouTube, TikTok, Snapchat, and Pinterest, for users’ attention and advertisers’ budgets. These platforms offer more diverse and engaging content formats, such as stories, videos, live streams, e-commerce, and gaming, which may attract more users and advertisers than Twitter’s text-based microblogging.
- User growth: Twitter’s user growth has slowed down significantly in recent years, as it struggles to attract new users and retain existing ones. According to Elon Musk, Twitter has 540 million monthly active users as of June 2023, which is only a 3.5% increase from a year ago. In comparison, Facebook has over 3 billion monthly active users, while TikTok has over 1 billion. Twitter’s user growth is also uneven across different regions, with most of its users concentrated in the US.
- Content moderation: Twitter’s content moderation policies have been controversial and inconsistent over the years, as it tries to balance free speech and safety on its platform. Elon Musk’s takeover of Twitter in October 2022 sparked a backlash from many users and advertisers, who criticized his decision to restore many banned accounts, limit the number of tweets users can read in a day, and rebrand the company as X. Musk’s approach to content moderation has also raised regulatory concerns in some countries, such as Germany and India, where Twitter has been accused of failing to remove illegal or harmful content in a timely manner.
- Innovation: Twitter has been slow to innovate and adapt to changing user preferences and market trends. For example, Twitter launched its video-sharing app Vine in 2013 but shut it down in 2017, missing out on the opportunity to capitalize on the rise of short-form video content that was later dominated by TikTok. Similarly,
- Twitter launched: its live-streaming app Periscope in 2015 but shut it down in 2021, losing ground to other live-streaming platforms such as Facebook Live and YouTube Live. Twitter has also been lagging behind other platforms in offering features such as stories, voice chat, e-commerce, and newsletters.