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Twitter Is Going Beyond Advertising

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Oct. 18 2018, Updated 10:30 a.m. ET

Non-advertising activities contributed 15.5% to top line

As much as the digital advertising market is expanding, with global spending on digital ads on track to hit $227.1 billion in 2018 according to Zenith estimates, Twitter (TWTR) and many of its peers in the digital advertising business have sought to diversify beyond advertising.

When Twitter reports its third-quarter results on October 25, there will likely be a lot of investor attention on how its diversification efforts are progressing. In the second quarter, the company made strides in diversifying its business. Non-advertising operations contributed 15.5% to its total revenue in the period compared to 13.3% in both the previous quarter and the previous year’s quarter.

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Several of Twitter’s peers in the hardware business

Alphabet (GOOGL), Facebook (FB), and Snap (SNAP) are also making efforts to diversify their businesses beyond advertising, which currently accounts for the vast majority of their revenues. Google, the largest branch of Alphabet, has ventured into cloud computing and hardware to try to reduce its reliance on advertising dollars. Facebook and Snap are also in the hardware business, with Facebook launching a video-calling device called Portal earlier this month. Snap sells camera-equipped sunglasses called Spectacles.

Twitter currently draws the bulk of its non-advertising revenue from data licensing. Twitter’s revenue from data licensing activities and other non-advertising operations jumped 29% year-over-year to $109 million in the second quarter.

Most diversified company

Among many of its Internet advertising peers, Twitter was the most diversified company in the second quarter. While non-advertising business accounted for 15.5% of revenue at Twitter in the second quarter, non-advertising operations accounted for 3.8% at Yelp (YELP), 1.5% at Facebook, and 0.8% at Snap in the period. Only Alphabet came close, with its non-advertising business contributing 14.1% to its top line in the second quarter.

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