Twitter has just announced that it is buying social data harvester Gnip, but it hasn’t explained how it intends to make money on the back of the deal.
Neither has it explained how Gnip will sit with Twitter once the deal has closed, nor indeed, what is likely to happen in the future.
Maybe it’s a bit premature to be looking for answers to questions like those given that the deal was only announced this morning, but details about how this will unfold over the coming months are so scanty that you’d almost think Twitter doesn’t really know how it is going to incorporate Gnip into the fold. It hasn’t even disclosed how much it paid.
Why Buy Gnip?
That said, the two companies are a perfect match, especially given the fact that Gnip went into partnership with Twitter four years ago to harvest information from the 500 million tweets that are sent every day, then turn that information into data blocks that marketers and advertisers can use.
According to the Twitter blog post, the thinking behind the acquisition is to make its data more accessible. The post says:
As Twitter has grown into a platform that delivers more than 500 million Tweets per day, Gnip has played a crucial role in collecting and digesting our public data and delivering the most essential Tweets to partners.”
The obvious question here is why, if Gnip was providing this service to Twitter anyway, did Twitter need to buy it? The blog post, if it doesn’t answer it, certainly points to a possible answer.
We believe Gnip has only begun to scratch the surface. Together we plan to offer more sophisticated data sets and better data enrichments, so that even more developers and businesses big and small around the world can drive innovation using the unique content that is shared on Twitter.
Reading between the lines here, it is also possible to speculate that Gnip was only beginning to monetize the information it was gathering, but was also on the way to making it a lot more lucrative, something that Twitter, as the originator of the information, probably feels it should be benefitting from.
This is particularly true given that, according to Gnip, it now has customers in 42 countries and has processed 2.3 trillion tweets since it set up in 2008 organizations across verticals like finance, professional services and public relations.
Twitter Under Pressure
Keep in mind in this respect that Twitter has already been buying into analytics including the technology from social TV firm Bluefin Labs and real-time data company Locomatix.
With business intelligence and big data analytics now available to an increasing number of enterprises as these applications move to the cloud, it is possible to analyze data that hasn’t been accessible before, creating a commercial stream that is not going to dry up anytime soon.
But there’s more to it that just trying to make a few bucks through selling data. Twitter still makes most of its money from advertising, even if data licensing accounted for 9.5 percent of its income in the fourth quarter to the end of last December at $23 million.
That figure was up 80 percent year-on-year but still isn’t enough to keep investors happy. Twitter is under pressure to make money in whatever way it can, especially given the Q4 figures.
Those figures showed revenues of $243 million, up 116 percent year-over year. Even still, it announced a net loss of $511 million on the quarter, and $9 million once charges were stripped out of the equation.
More significantly, total users grew only 3 percent in the fourth quarter. On metric of usage, total timeline views actually fell from the third quarter, dropping from 159 million to 148 million.
What Can Be
Having gone public last November, Twitter, is under pressure not so much to make money as to show that it can make money. Data as a commodity, particularly the data that it owns, might just be the way to do that. What better way to do that that to incorporate data harvesting directly into the business itself.
What happens to Gnip now is anyone’s guess. In the Gnip blog post, CEO Chris Moody said:
Our customers can continue to build and innovate on one of the world’s largest and most trusted providers of social data and the foundation for innovation is now even stronger. We will continue to serve you with the best data products available and will be introducing new offerings with Twitter to better meet your needs.
Twitter for its part said it would continue to provide data to Gnip’s customer base and that it would be extending its data platform, through Gnip and existing public APIs , even further. How far "further" goes remains to be seen.