There are many new and young companies that are really successful and among these is Twitter. It is a social media site and as it is free to be a member it can be hard to understand where they get their money from.
Reputation and members
before being able to make a lot of money a social media site needs to build up its reputation. By growing and having a lot of members it will become more and more popular. Many people will have heard of the site and many will join up because their friends and family are members and they can keep in touch with them or follow people that they know, like or admire. The more members there are, the more it grows and it means that the site can expand. Things like celebrities using the site will help it to grow even more in popularity.
Once the site is popular, it is then possible to start making money out of advertising. Businesses that use the site are able to pay to get their tweets shown to members of the site that are not followers of them. It is possible to pay to have a specific tweet, a whole account or a trend advertised in order to encourage others to like or retweet it. This can then have the knock on effect of increasing sales. It is possible to set up an advertising campaign with a price per click or retweet rather than per exposure. It is appealing to customers because it looks just like a normal tweet and is therefore not flashy and distracting and does not disrupt their use of the site so much.
They also make money from selling its public data so that it can be used to calculate trends and things like that. Although this is not a big part of their revenue, it all helps to bring in some extra income.
Of course Twitter has to also spend money. Not only would they need to pay their IT staff to keep the site up and running and make necessary improvements to it, they would also have to pay admin staff, for offices, tax, insurance and all the other expenses of running a company. They have also spent a lot of money in the past paying for advertising for themselves so that more users sign up to them. Therefore they have had to be careful to balance income and expenditure like any business to make sure that they do make a profit and there have been times when they have not been able to do this. However, sometimes it is necessary to reinvest in a business to allow it to grow, but if this happens for too long then a business will not be able to survive. So it is a matter of getting the balance exactly right and making sure that you can get enough profitable time to be able to expand and grow and pay all of your expenses.