This note is from BI Research, a new tech-industry intelligence service. The service is currently in beta and free. To learn more and sign up, please click here.
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.
What are we missing? Email comments and questions to [email protected]
This note was published as part of BI Research, a new industry intelligence service from Business Insider. The service is currently in beta and is free. To learn more and sign up, please click here.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.