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Twitter Is Quietly Building A Huge Business

In my discussions with other marketers we often pondered how Twitter would monetize its platform and how successful they would be.  It appears from this report by Pascal-Emmanuel Gobry from BI research that they are well on their way. 

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The conventional wisdom about Twitter  is that it may be a very nice product, but it doesn’t have much of a business.  And up until recently, that was true. And the fact that Twitter has been mostly  dodging questions about its business metrics helps perpetuate the idea.

But we think it’s not true anymore.

After a bit of fumbling, which is normal for a company exploring a new  medium, Twitter has been quietly but steadily rolling out its ad units. And  evidence thus far suggests that they have been performing  really well.

Yesterday SAI  reporter Ellis Hamburger “spoke with Hilary Smith, SVP of  Communications for Digital content at NBC.  She informed me that Promoted Tweets NBC has purchased have been shockingly successful,  and have received a ton of engagement from Twitter users.” Hamburger wrote that  when he first saw Twitter ads they were actually useful and relevant, and this  has been this analyst’s experience as well.

A few weeks ago Electronic Arts said its Promoted Trend also exceeded expectations.

In our conversations with ad industry  insiders as part of our special report on Twitter’s business, they said  Twitter’s ads showed lots of promise. They said Twitter still needs to work on  some aspects, but Twitter seems to be improving every day.

Therefore, this is what we’re prepared to say about Twitter’s business:

  • It’s still early days—and that’s the point. Right now,  Twitter’s “promoted tweets” (ad tweets that show up in a user’s Twitter stream)  only show up on Twitter.com. Soon they will show up in Twitter’s broader  application ecosystem. And the ad system keeps getting refined: for example, ads  can only be targeted on a handful of metrics. What we’re seeing right now is  very impressive—and yet it’s just an inkling of the future.
  • Twitter ads have the potential of being a drug for  marketers. Twitter charges ads by “engagement” (clicks, replies,  retweets or follows), and ads can generate social media conversations around a  brand. In other words, Twitter may have cracked the code on allowing advertisers  to create genuine social media conversations around a brand. That would be a  tool marketers simply couldn’t get enough of.
  • Twitter is the new TV. It’s where you tune in to see what’s  going on around the world (and with your friends). And in exchange, there is  limited commercial interruption. And on the whole, that interruption is fine for  users and lucrative for publishers.

We  previously estimated Twitter’s revenue opportunity at $2 billion, using low  revenue-per-user estimates compared to Twitter’s peers. This might prove to be  the low end.

Jim Thomas and JC Thomas Marketing Communications help companies increase revenue through creative marketing solutions and intuitive software.  you can reach Jim at jim@jcthomas.com or at 704.377.9660 ext. 2521

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