Twitter Inc (NYSE:TWTR) shares have been all over the grid so far in 2016, as wave after wave of buyout rumors come and go. Most recently, TWTR stock plunged 30% in the first two weeks of October on reports that Salesforce.com, Inc. (NYSE:CRM) and other potential suitors are no longer interested in acquiring the embattled social network.
Hope, however, is not lost for TWTR stock holders. While most of the media’s attention has been focused on a possible buyout, Twitter may have quietly found its next major growth opportunity.
TWTR Stock Pivots
Twitter’s user growth and ad revenue issues have been well documented. Its solution to throw more video ads at users may not seem particularly unique. Video ads are much more lucrative than typical social media ads, but Twitter’s social media competitors have beaten TWTR to the punch.
“Playing catch-up for video is no easy feat, especially when you consider the resources deployed by Snapchat, Facebook Inc (NASDAQ:FB) and YouTube,” Monness, Crespi, Hardt & Co analyst James Cakmak said in July.
Twitter’s recent moves in the video space, however, may indicate that it has a different set of targets in mind.
Streaming’s Achilles’ Heel
Netflix, Inc. (NASDAQ:NFLX) and other streaming subscription video services have preyed upon the cord-cutting phenomenon by offering cable TV defectors a much cheaper option. But despite Netflix’s success, there is still one huge advantage that cable TV has — live content.
TWTR is just starting to dip its toes into streaming video, but it’s starting with the market’s Achilles heel — live sports. Twitter currently has modest, under-the-radar streaming deals in place with the NFL, MLB, NHL, Wimbledon and the NBA.
The NFL test run seems to be going particularly well so far. Despite visits from more than 2.1 million people, the first Twitter NFL Thursday night livestream went off without a hitch. Viewers reported no major quality issues, and the stream rivaled HDTV quality.
Coming Soon: The Twitter Network?
Twitter’s streaming video test runs are not just sports-related. Twitter’s livestream of the second presidential debate reached 2.5 million people. And there’s a kicker. While TV ratings for the second debate fell 18% compared to the first debate, Twitter ratings jumped more than 30%.
Watching political events live on a social media platform has major appeal to viewers who already like to tweet their opinions in real-time. The same goes for sports fans.
It’s easy to look at well-established streaming video platforms by Netflix, Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube and laugh off TWTR’s chances at making up lost ground. But if Twitter is targeting the livestreaming space, its true competitors may not be so intimidating.
Fledgling live TV mini-bundle services like Playstation Vue from Sony Corp (ADR) (NASDAQ:SNE) and Sling TV from DISH Network Corp (NASDAQ:DISH) offer small bundles of major TV networks streamed live over the internet with plans as low as $20/month. But one thing neither Sling TV nor Playstation Vue has is 313 million users. They also don’t have their platforms already installed on millions of smartphones, tablets and smart streaming devices.
Twitter does.
It’s way too early to start attaching dollars and cents to Twitter’s streaming video initiatives. The “Twitter Network,” however, may not be as much of a long shot as it seems. While TWTR stock investors have agonized over a potential buyout, TWTR stock may be creating some major organic long-term value right under their noses.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
