All the buzz around social media madness to this point has surrounded the immense revenue potential for advertising. Basically, that's what drove the worth of Facebook to $200 billion and Twitter's estimated value to $17 billion. But we forget that social media is still a toddler in terms of businesses. After all, the Old Farmer's Almanac was founded in 1792, Jim Beam in 1785, and DuPont in 1802. Comparatively, Twitter, Facebook, and LinkedIn aren't out of diapers or speaking in sentences yet.
The real future of social media revenue most probably lies not in advertising to those billions of users (Facebook has an estimated 1.23 billion, while Twitter boasts almost 3 million), but in analyzing and selling all that juicy data. Of course, advertisers are the primary users for that data, but the analytics is what will drive the future revenue of social media, not selling ads on their immensely popular platforms.
Twitter is proving this point, though silently. Over the past few years, they have gradually eaten up companies that buy their data, which is known as the Twitter Firehose. The ones they couldn't gobble up, they just cut out of the loop. Here's a look into what Twitter is up to and what it means for the future of social media and big data.
Why Twitter Data is Important to Marketers
Twitter is one of the most popular of all social media outlets, especially with the innovation of the hashtag. In addition to being a powerful platform for getting marketing messages out, it's an excellent resource for engaging in deeper, more meaningful conversations with both businesses and consumers. But Twitter's value is not just in engaging conversations, it gives marketers an enormous amount of useful marketing data, including what people are talking about; how they feel on numerous social, political, commercial, and personal issues; and what products, services, etc. people are most interested in.
Twitter data, combined with data enrichment strategies, can help marketers reach the right customers with the right messages at the right times in order to achieve success. Though the recent changes bring Twitter's Firehose data in house, it does not cut off this valuable stream of data from marketers completely.
Twitter's Silent Foray Into the Data Analytics Realm
In January 2013, Twitter bought Crashlytics for $38.2 million. Crashlytics provided developers with app crash reporting data. Just the following month, Twitter gobbled up Bluefin Labs for $67.3 million. Bluefin Labs provided television advertisers with social TV analytics. In October of the same year, Twitter took on MoPub for $350 million. MoPub was a mobile ad exchange that thrived off targeting data.
Also in 2013, Twitter quietly devoured five other smaller companies, all with a focus on data and data analytics. Twitter reportedly paid just over $13 million for the sum total of these smaller businesses.
In April 2014, in a less stealth manner, Twitter took over Gnip for an undisclosed amount of money (but you can bet it was a lot). Gnip was a 3rd party provider of the full Twitter Firehose, but also dealt in historical Twitter data, as well as data from numerous other social media companies, including Instagram, Reddit, Tumblr, Bitly, and a few others.
The Surprise Slam-Dunk: Cutting Ties With Firehose Resellers
Despite this semi-quiet takeover of so many competitors in the data analytics realm, it came as a complete surprise when Twitter announced its decision to cut off all 3rd party Firehose resellers just one year after their Gnip acquisition. Perhaps most shocked by the announcement was DataSift, the largest 3rd party Firehose reseller affected by the decision, which states that they were currently in contract negotiations with Twitter and had no idea they intended to pull out of such agreements. Twitter plans to end these partnerships by mid-August of this year.
Twitter maintains that their intention is to focus on partnerships that add value to their endeavors and end relationships that merely mimic or reproduce what Twitter does. Twitter seeks to build direct relationships with the customers for their data so that they can better understand the customers' needs, get direct feedback for their product roadmap, and enable more solutions for the brands that depend on Twitter Firehose data.
The Future for Firehose Resellers
The resellers hardest hit by this decision is DataSift and the NTT Data, which primarily deals with data from the Japanese Twitter feeds. These companies can still get access to the Firehose data, but will have to buy it from another 3rd party via connector, which naturally reduces the amount of revenue they can generate from the Firehose. DataSift is in the process of generating more revenue from its Series D round of funding, which has already yielded the company about $78 million. According to DataSift, about 95 percent of their data revenue actually goes back to Twitter.
The Future for Twitter
Twitter's revenue currently comes from a combination of revenue ads and data analytics. Into the future, expect more of Twitter's income to derive from analyzing and selling data, while advertising becomes merely a secondary source of income.
Most likely, this is the way of the future for all social media platforms. As big data becomes more critical for advertising, and indeed business operations in general, expect big data marketing to move front-and-center while ad selling becomes less of a factor for social media revenue generation.
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