Netflix Just Showed Twitter How to Take On a Multibillion-Dollar Industry

By Markets Fool.com


Netflix tweeted out reminders when its Marco Polo made its debut on Dec. 12. Source: Netflix.

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On Friday morning, a handful of Twitter users received a tweet from Netflix alerting them of a new show available on the streaming service. No, Netflix wasn't spamming Twitter users. It placed an ad on the platform earlier in the week with a button that allowed users to sign up to receive a tweet when Marco Polo premiered.

The ad was just a small experiment from Netflix, but the format -- send a tweet when something is available -- has a lot of potential for Twitter, as it's uniquely suited for the platform.

One of Netflix's best ideas ... for Twitter
Netflix's "Tweet Me a Reminder" cards are an excellent example of how companies can use custom Twitter cards for advertisements. Additionally, it would make sense for Netflix to use Twitter's new software development kit, Fabric, to capture Twitter handles and send out the individual "@" replies for those who sign up. In all, Netflix is showing other companies how to get the most out of Twitter.

And Twitter should be working to draw other businesses' attention to this prime example of its platform's potential. The move makes perfect sense for Netflix, since it doesn't have the benefit of commercials to promote its original shows on its over-the-top network. But it would work wonders for a lot of businesses with limited advertising budgets -- like independent musicians, or small start-ups -- as well as any business that uses email marketing.

Replacing email
Analysts and tech writers have been saying social media companies are bound to replace email for years. Many view it in the context of personal correspondences, but fail to see the potential of email marketing moving to Twitter. Email marketing is a rapidly growing multibillion-dollar industry,totalingan estimated $3 billion in 2014.

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Netflix just showed everyone how easy it is to get people to sign up for alerts on Twitter. It's just one button to push. Users don't have to type in their email address and confirm that it's actually their email; that's all taken care of when they logged into Twitter.

Netflix showed how easy it is to capture Twitter handles. Twitter's Fabric will allow companies to store those handles and use them, and this summer Twitter rolled out a feature that will allow advertisers to easily sell products to those users that sign up. Advertisers can implement a buy button in their tweets, which reduces the amount of friction in selling products compared to email marketing.

So much potential, so little execution
In September, venture capitalist Peter Thiel made some not-so-nice comments about Twitter's management. But even the early Facebook investor noted that the platform has a lot of potential. As Thiel noted, Twitter "should probably be making way more money."

There's a $3 billion industry just waiting for Twitter to disrupt, and Netflix just crafted the sword that could help Twitter's management take it down.

For 2014, analysts expect the company to post revenue of just $1.4 billion, but expect that number to grow to $2.3 billion next year. There are a lot of opportunities sitting out there for Twitter that could lead it to beat those expectations for next year.

Its logged-out visitors alone could be worth an estimated $1.3 billion, according to CFO Anthony Noto. The company is just getting started with curated timelines, which offer potential for premium advertising rates, and the interest graph indicated by who a user follows should reduce noise and improve targeting, allowing Twitter to increase ad rates even higher than Facebook's.

But Twitter's progress on all of these fronts, in addition to the potential Netflix just presented, is either slow or non-existent. As a result, Twitter's revenue growth (and its profits by extension) continues to lag behind its real potential. On the other hand, if management starts to show progress on any of these potential catalysts, Twitter could easily beat analysts' estimates.

The article Netflix Just Showed Twitter How to Take On a Multibillion-Dollar Industry originally appeared on Fool.com.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook, Netflix, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.