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Is Twitter’s Data Licensing Business Safe?

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Apr. 19 2018, Updated 9:00 a.m. ET

Data licensing sales increased 10%

Data licensing is Twitter’s (TWTR) fastest-growing revenue division, with sales up 10% YoY (year-over-year) to $87 million in 4Q17. The advertising business, Twitter’s largest revenue division, grew only 1% YoY in 4Q17. But its data licensing business is set to attract a lot of investor attention when it reports its 1Q18 results.

In the final week of March 2018, Citron Research published a report claiming that congressional scrutiny of social media companies might end badly for Twitter’s data licensing business. The report went further to state that Twitter was most vulnerable to privacy regulations next to Facebook (FB) and Alphabet’s (GOOGL) Google.

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Twitter rejects claims of vulnerability

Citron Research is an online investment newsletter run by short seller Andrew Left. The report on Twitter pointed to a potential heavy regulation of Internet companies in the wake of the data harvesting scandal at Facebook.

In response to Citron Research’s claims, Twitter said its data licensing practices are beyond reproach because it only handles public data, not private communications.

Businesses turn to Twitter for data insights

Twitter’s data licensing serves businesses looking for data insights to make their marketing campaigns more effective. Banks and CPG (consumer packaged goods) companies are some of the businesses that license data from Twitter. Although CPG companies such as Coca-Cola (KO) and Procter & Gamble (PG) have traditionally relied on television commercials to connect with customers, industry forecaster eMarketer says CPG companies are increasing their digital advertising budgets, which could be a boon for Twitter.

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