Why Twitter Is More Focused on Data Licensing Than User Growth

Twitter (NYSE: TWTR) disappointed investors when it reported flat monthly active users for the second quarter. In fact, Twitter's U.S. user base declined by 2 million to 68 million, but it was offset by international growth. Nonetheless, Twitter was keen to point to its third straight quarter of double-digit year-over-year daily user growth.

What's gone largely unnoticed is the growth in Twitter's data licensing revenue. The other side of Twitter's business grew 26% year over year to $85 million, an acceleration from last quarter. While data licensing still only made up 15% of Twitter's total revenue, the profit margin on that revenue is significantly higher than its ad revenue. "$1 in data revenue is equal to about $3 to $4 in advertising revenue, given the difference in profitability," CFO Anthony Noto told analysts on the second-quarter earnings call.

Image source: Twitter, copyright Aaron Durand (@everydaydude) for Twitter, Inc.

Source: Fool.com