Weekly Business Saga

The Buzz of Twitter

Authored by Dhruv Paniya, Student at School of Law, NMIMS Indore

History of Twitter

Jack Dorsey, Biz Stone, Noah Glass and Evan Williams launched twttr in July of 2006, which was later named Twitter. The basic idea behind developing Twitter was to create a platform where the users can use SMS service to communicate with/within a small group. The work behind Twitter started in March 2006. Soon, Jack Dorsey published the first message on twttr which read as “just setting up my twttr”. During the early development of Twitter, the members had to pay the SMS charges themselves which they incurred for sending messages on Twitter. As of January 2021, the company has 353 million daily active users.

Business cum Revenue Model

Twitter is a free-to-use application. Its main source of revenue is through advertisements and data licensing. In 2019, 86.53% of Twitters’ revenue amounting to almost $3Billion came from advertising, and the remaining 13.57% amounting to $465 million came from data licensing. Twitter earns most of its revenue from selling promoted products such as promoted tweets, accounts, trends, etc. It uses a specially designed algorithm so as to facilitate the promotion and to ensure that it reaches the correct target audience. Advertisers also have an option wherein they can pay for the streaming of video ads. It also earns from publishing ads on other websites. Another major source of revenue is data licensing through which it shares the data with other companies who work on research and real-time data analysis.

Acquisitions and Deals

In the year 2013, Twitter acquired MoPub, the largest mobile advertising server in an all-stock deal valued at $350 million. In 2014, it acquired an application programming interface (API) company, GNIP. It was a cash and stock deal amounting to $134 million. The full terms and conditions were not disclosed by either of the parties. In order to improve mobile installation and engagement advertisement, it acquired TapCommerce in June 2014 for $100 million. Also, to develop its video capabilities, Twitter acquired live video streaming startup Periscope in 2015. The largest acquisition made by Twitter was in 2015 when it acquired Teleport for a whopping $459 million in an all-stock deal. This deal helped Twitter in boosting its ad revenue. Again, in the year 2016, it acquired Magic Pony Technology, a company that developed neural network systems for image-related data expansion. The deal was closed at $150 million.

Technologies

Mainly, Twitter uses open-source software. Initially, it saved the tweets on MySQL database but as the number of tweets increased gradually, they developed Gizzard– a framework that uses distributed databases. In the beginning, Twitter used the Ruby on rails framework for its interface but then it shifted to the Scala framework. This shift proved to be very beneficial for Twitter because Ruby on rail provided support only for 200-300 requests/sec/host but the new framework provided for 10-20k requests/sec/host. Snowflake software is used for registering Individual tweets under unique IDs. Twitter’s API (Application programming interface) allows other web services and applications to integrate with it.

Revenue and Profits

Twitter’s annual revenue for the year 2019 was $3.4 Billion and net profits for the same year were $1.4 Billion. In 2020, the revenue was $3.7 Billion and the net loss for the same year was $1.1 Billion. Twitter India accounted for a revenue of ₹43.4 Crore in the financial year 2017-2018 which increased to ₹56.9 Crore for the year 2018-2019. Net profits for the year 2017-2018 were ₹5.8 Crore.

The Indian Government and Twitter

Twitter India recently lost its status as an intermediary platform on its failure to comply with new IT laws that the Indian government has set forth. Twitter is the only social media platform that failed to comply with the new IT laws which came into effect on 26 May. The requirements under the new law were that the intermediaries should appoint a chief compliance officer, nodal officer, and grievance officer in the country and they should all be Indian Citizens. Even after being given multiple opportunities to comply with laws, Twitter failed to do so. As it lost its intermediary status, it won’t be considered as a platform where users post content, instead it will be considered as a publisher and will be editorially liable for anything that will be published on its platform.

Conclusion

The last two decades were the golden era for social media. Many platforms including Twitter saw exponential growth. As of 2021, Twitter has 330 million active users. Twitter is a versatile tool that is used to share ideas, thoughts, and visions. While it faces many challenges, if used properly and ethically it can stand out to be a promoter of freedom of speech. However, the non-compliance with the new IT laws is going to affect Twitter as now it’ll be responsible for everything and anything that is published on the platform and this can cause serious problems because it is impossible to monitor such a large audience. Twitter will have to find a way around this problem or its growth would be compromised.

 *Disclaimer: The content of this article is intended to provide a piece of general information. The views are expressed by the Author solely and BFTLR may or may not subscribe to the views of the Author.

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