Making Sense of Twitter’s Non-Advertising Business
The crowded online ad industry
Although Twitter (TWTR) depends on advertising sales for the majority of its revenues, the company has been working to diversify its revenue streams beyond online advertising to reduce risk to its growth. The online advertising industry has become crowded and fiercely competitive as peers such as Amazon (AMZN) and Verizon (VZ) have increased their campaigns for a larger share of the digital advertising market.
The increasingly crowded Internet advertising scene is pushing Twitter, Facebook (FB), and Alphabet’s (GOOGL) Google, which traditionally rely on advertising sales for their revenues, to look beyond the ad industry for new opportunities.
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Twitter’s non-ad sales up 26%
Aside from advertising, Twitter earns revenues through its Data Licensing and Other segment. These revenues increased 26% year-over-year to $85 million in 2Q17, as shown in the chart above.
Growth in this segment partially offset the decline in Twitter’s core advertising business, where sales fell 5% to $489 million. Twitter’s overall revenues in the latest quarter came to $574 million, down about 5% from 2Q16.
Revenues from Twitter’s Data Licensing and Other segment constituted 14.8% of the company’s revenues in 2Q17, compared to 11.1% in 2Q16.
A paid Twitter service
As part of reducing its reliance on advertising sales, Twitter is considering introducing a premium service that it would charge users for access. Going by the company’s recent comments, the paid subscription service has not taken shape yet. However, industry observers suggest that it could be tied to the company’s TweetDeck feature, which is popular with professionals on the social network.