How Twitter Inc (TWTR) Is Stealing YouTube’s Lunch

Twitter stock is hardly moving, but the addition of video revenue-sharing shows that Dorsey knows Twitter needs a change

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Source: Andreas Eldh via Flickr

In a move designed to siphon off some of the web traffic currently enjoyed by competitors like Facebook Inc (NASDAQ:FB) and Google’s YouTube, Twitter Inc (NYSE:TWTR) is taking another big step to become more like those rivals. Twitter is going to start sharing ad revenue with users that upload videos and draw a viewing crowd with them.

Twitter stock didn’t move much on the news, most likely because TWTR owners aren’t entirely sure the maneuver will do much to boost the microblogging site’s overall engagement.

It’s not a bad bet, though. Twitter has little to lose and much to gain be venturing into these uncharted waters.

Twitter Video Takes Aim at Rivals

Actually, the Twitter video revenue-sharing platform isn’t brand-new. The company already allows some major players to upload their clips and collect a hefty 70% of the advertising revenue they create when the ad appears right before the uploaded video. The NFL is one of those organizations.

What’s new is the fact anyone in the U.S. can apply to become part of the so-called Amplify Publisher Program. Presumably, most will be approved, regardless of the size of their audience.

It’s an aggressive offer. Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) only offers 55% of the ad revenue generated by YouTube videos to those who create and/or upload them. Facebook offers the same revenue split with its video creators that YouTube does, and Facebook is picky about who it lets participate in its video program.

Moreover, TWTR doesn’t require exclusivity for any of its uploaded videos. They can be posted and played at other venues that also don’t require exclusivity.

Twitter also unveiled new video editing and uploading tools to facilitate the rapid expansion of the new offer.

Identity Crisis

This is (whether Twitter CEO Jack Dorsey wants to admit it or not) an attempt to become more like the competition rather than less like it.

Twitter has been an interesting idea since its inception in 2006. It aimed to attract users with a “less is more” approach. Users weren’t inundated with lengthy posts and a string of others’ selfies. Rather, Twitter was built from the ground up to be a minimalist platform. It even limited each “tweet” to only 140 characters. Video wasn’t even on the radar when the platform was first conceived.

Problem: Those videos and a self-indulging platform are what consumers want.

Twitter’s minimalistic shtick has prevented the outfit from meaningfully growing its user base since the first quarter of 2015. To that end, the new Twitter video revenue-sharing deal could be a much-needed growth catalyst.

Impact on Twitter Stock

The challenge will be breaking into a fairly well-gelled online video market. Content creators choose YouTube as their preferred platform because that’s where the majority of video-hungry web surfers start their search. And those web surfers start their search with YouTube because they know that’s where the best video content creators are found. Twitter will need to convince both groups it’s worth a look, too.

Facebook doesn’t have the same video stronghold YouTube does, but its video ambitions are only a piece of a much broader business model. Twitter will also still need to do all that Facebook does if it wants to keep its video-seeking crowd engaged the way Facebook… something Twitter hasn’t proven it can do yet.

Nevertheless, it’s something that can only help bolster the mostly anemic value of Twitter stock. It’s far from the only thing Dorsey needs to do to become more like the rivals his company has tried to avoid mirroring for years now.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/twitter-stock-twtr-video-ads-youtube/.

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