Data licensing segment grew 22%
Twitter (TWTR) is pinning its profitability hopes partly on the success of its data licensing business, an operation that has largely existed in the shadows. Data licensing is part of Twitter’s non-advertising operations, and it’s the company’s fastest-growing product area.
The data licensing business has been growing at a double-digit rate for at least the last five consecutive quarters. In 3Q17, Twitter reported that revenue from its data licensing and other non-advertising sources had risen 22% YoY (year-over-year), marking the third consecutive quarter of accelerating revenue growth in the segment. In contrast, Facebook’s revenue from non-advertising sources fell 5.0% YoY in 3Q17.
Advertising business fell 8.0%
Twitter is looking to its data business to fuel growth and sustain profitability in the future. The company’s overall revenue fell 4.0% YoY in 3Q17, dragged down by an 8.0% drop in advertising revenue. Advertising makes up more than 80% of Twitter’s overall revenue.
Twitter’s data business serves different market categories. Some companies come to Twitter for data they think they can leverage to better position themselves in their industries. Companies that come to Twitter for data include banks and CPG (consumer packaged goods) companies. It’s worth noting at this juncture that CPG companies, which include brands such as the Coca-Cola Company (KO), Unilever NV (UN) (UL), and Procter & Gamble (PG), have usually ranked among the world’s top advertisers in terms of spending.
Product developers come to Twitter for data
The other market for Twitter’s data business is companies that utilize the data to develop products, which could be things such as apps.
We’ll soon be able to see how Twitter’s data business fared in 4Q17.