How do twitter earns money

Twitter makes almost all of its money by selling advertisements -- called promoted posts or promoted stories -- that show up in its users' feeds. Twitter's data licensing segment accounts for the rest. Both companies operate in a digital advertising industry that's growing quickly as people consume more media online rather than through television, newspapers, and magazines. Yet there are major differences that help explain why Facebook's stock has been setting new all-time highs lately while Twitter's is languishing well below its IPO price.

The biggest is in the area of reach. Facebook also has a much more engaged base of people who post status updates, pictures, and messages. That translates into additional opportunities to show ads and increased engagement on the ads themselves. In contrast, the combination of a stagnant user base and a slipping grip on the advertising space has pushed Twitter's revenue growth rate into negative territory.

That has had a predictably brutal impact on the stock price:. Twitter has an unusually global user base. However, the company is struggling to monetize its service in these markets. Facebook suffers from a monetization gap, too. For a fee, Twitter will insert a company's promoted tweet into the timelines of users. These users can be targeted based on their demographics, location, the profiles that they follow and the device being used.

Promoted tweets are designated as such within user timelines. For example, Samsung may have a tweet advertising one of its new smartphones. For this campaign, it may target users in the United States who already follow other similar tech companies and are viewing the tweets on an iPhone.

Typically, companies do not pay a flat fee to Twitter for this service. Instead, they may pay based on the number of 'clicks' or 'retweets' that the promoted tweet receives. This is similar to many other forms of online advertising that are based on user actions. Companies can also pay Twitter to promote their Twitter profiles in an effort to gain more followers.

Users who log into their Twitter accounts will usually be shown a few profiles that they may wish to follow. These suggestions are usually generated via an algorithm that takes in account common demographics or if the profiles follow the same people. When a company bids to have its profile promoted, then its Twitter profile will appear as one of these suggestions to the users being targeted.

Along the sidebar of the Twitter website is a list of current trending topics. Twitter on Wednesday launched Super Follows, a feature that allows select users to charge others for access to subscriber-only content. This new feature will finally allow the company's most popular users to generate revenue from their followers, but access to Super Follows is limited. Not everyone will be able to set up Super Follows for accounts. It's only open to users who:. Open up the Twitter app and swipe the screen to the right to pull up a menu.

Toward the bottom of that menu you will see "Monetization. This will take you to a screen that explains how Super Follows works and how much you could earn by monetizing your Twitter account. This is purely hypothetical, as CNBC doesn't allow reporters to earn money this way. Tap on "Check eligibility" at the bottom of the screen, and you'll be taken to a screen that shows if you qualify. On Thursday, Twitter begins its first day of trading after listing on the New York Stock Exchange, making it the biggest initial public offering IPO from a technology company since Facebook went public in May Twitter may have about million monthly users, but the company is not profitable - yet.

So, how does Twitter make its money and how can we explain its high valuation? There are three main ways for a company or an individual to advertise on Twitter: by promoting a tweet that will appear in people's timelines, promoting a whole account, or promoting a trend.

Only last week Twitter changed the way posts are displayed in the timeline feed, allowing photos and video previews to appear without needing to click on a link - a move some analysts say will help advertisers to better show off their content. Twitter tends to charge its advertisers according to the amount of interaction their content generates. A budget is usually set at the start of the campaign and then the advertiser pays per click or per retweet. It also has a "bidding" system in which advertisers compete with each other to have their content appear in a particular space.

Anything that disrupts the user experience might reduce engagement from users, which in turn can put off advertisers, Ms O'Reilly says.