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With Gnip Buy, Twitter Starts Taking Its Data Business Seriously

Big data, big dollars.

Twitter announced it has acquired Gnip, a Colorado-based startup that has worked closely with the microblogging service — and its wealth of user-generated data — for years.

If you’re an average Twitter user, Gnip is probably a company you haven’t heard of before. It’s one of Twitter’s many “Certified Partner Products” — companies that Twitter works with to handle the massive amount of data that the company deals with on a daily basis. Twitter has dozens of companies involved in its Certified Partner Program.

Gnip, in particular, is important to Twitter. It’s a data reseller that has direct access to the Twitter “Firehose,” the nickname for the entire stream of tweets flowing through Twitter on a second-by-second basis.

Gnip is one of only a handful of companies that still has access to the Firehose — all the way back through when Twitter first started hosting tweets on the Web — and Gnip deals with other companies that want to comb that information for any number of uses. The company’s customers are as varied as day-trading firms looking for financial insights, to marketers and agencies wanting to scrape up all the social details and sentiment floating around on the Web about their brands.

“We believe Gnip has only begun to scratch the surface,” Twitter’s VP of Platform, Jana Messerschmidt, said in a blog post. “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.”

A few things of note here: This looks like a marked shift for Twitter in its third-party platform strategy. The reason that companies like Gnip existed was to act as the middleman for Twitter and external companies that wanted access to that data. There was enough demand to foster a few separate companies in the space — including competitors Datasift, Dataminr Topsy and Japanese company NTT Data, whose offices I’d love to be a fly on the wall in as the news broke this morning — and also shifted over to the resellers Twitter’s headache of dealing with the various outfits that wanted Twitter data.

Gnip, and other companies like it, perform a crucial service: Repackaging that raw stream of Twitter data is a gargantuan feat that requires no shortage of costly infrastructure to handle, something that all those third-party clients just can’t do. What I’m hearing from a bunch of people is essentially that Twitter can’t afford to let that service be farmed out any longer — especially if, say, some giant company decided to swoop in and buy Gnip, like Apple did with Twitter partner Topsy late last year.

To my understanding, Twitter didn’t quite take its data licensing revenue stream seriously for a long time. As many people familiar with the matter put it to me in the past: Twitter had to charge for the access to prove it was valuable, but it wasn’t about reaping cash — it was about validating Twitter data as a desirable product.

Perhaps with the Gnip acquisition, that stance has changed. Twitter will now bring the management of all of those relationships in house, which could signal that it actually takes that revenue stream seriously.

As the company’s S-1 stated last year, the data licensing business only brought in about a tenth of what Twitter’s overall revenue is ($70 million on revenues of $665 million total). So it’s not a giant moneymaker by any means. But owning the company could mean growing that business over time.

Last but not least, it’s a nice way to pick up a team of sixty-plus talented engineers schooled in the ways of Twitter and big data.

Twitter’s Messerschmidt said the company plans to continue Gnip’s existing relationships and grow the customer base — not to mention the rest of the data platform.

Terms of the deal were not disclosed. Shares of Twitter were trading up about a point, at $41.63.

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