Twitter‘s stock is fell yesterday after Citron Research reported that, “Twitter will generate $400 million THIS YEAR, by just selling user data. Not advertising.” As a result, Citron added, Twitter is the social media company “most vulnerable to privacy regulation.” The news that Twitter is being included, along with Google and Facebook, in a Senate hearing on data privacy has Citron worrying that their data practices may come as the biggest surprise.
Twitter’s advertising revenue fell in the past year, but its “data licensing” revenue grew in the same period. Data licensing is what allows Twitter to share and sell user data with third parties. Twitter’s CFO Ned Segal calls data licensing “a really high margin business.” Citron estimates that it delivers close to 100% margins. Big data is a huge industry, but unfortunately it relies on a lack of privacy. If regulations are passed that regulate companies like Twitter and Facebook on data policies, these companies could see big profit losses.
The Senate hearing will likely bring these companies’ data practices even more into the public eye. If there is one thing that Google and Facebook lack, its transparency. While the companies may suffer temporarily, letting their users know how their data is used will pay off in the long run. It will make users more conscious of their data sharing, and companies more accountable for user data privacy.