Twitter – Video star?

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Only video can keep Twitter from $10. 

• Twitter’s first attempt at streaming video has won some good feedback but the numbers need to be bigger to really move the needle against YouTube or Facebook.
• The first of ten broadcasts of NFL games aired on 15^th September and reached 2.5m users with around 250K online at any one time recording an average viewing time of 22 minutes.
• In contrast, 15.4m people watched the game on CBS and NFL networks with 48.1m people watching at least 1 minute of the game.
• In addition to Twitter, users could watch the game digitally using NFL mobile from Verizon or digital CBS but the vast majority appear to have used Twitter.
• The feedback has been broadly positive but some users did notice that there was a delay between the live broadcast and the video seen via Twitter.
• Twitter paid $10m to the NFL for the right to stream 10 of its games this year in a hope to encourage users to do more with Twitter than just blogging and Instant Messaging.
• Blogging and Instant Messaging make up a total of 16% of the Digital Life pie which I have long believed that Twitter has already fully monetised.
• I am convinced that this is the reason for its growth grinding to a halt (see here).
• If Twitter can entice its 300m users to do more with Twitter beyond these activities, then there is scope for revenues to begin growing again as it will have more traffic to monetise.
• The advantage that Twitter has is that it knows with great accuracy what its users like as they actively chose to follow issues compared to Facebook which is based on friends and hence, much more vague.
• This means that the value of its targeting is very good but while users spend only a short time with Twitter, there are limits to the amount of money it can earn.
• This is why the video strategy is so important.
• Media Consumption makes up another 10% of the Digital Life pie and should Twitter generate significant traction from it, there should be significant upside from current revenue levels.
• Without this growth, I still fear that Twitter’s shares will fall below $10 because even at these levels, with no growth, the shares are expensive.
• At that point, I would expect an acquirer to step in and add Twitter to its ecosystem.
• However, should Twitter gain meaningful traction in video, then it should be able to continue as an independent entity.
• This is a big if as YouTube and Facebook dominate this segment and both Facebook and Alphabet are much bigger and much stronger than Twitter.
• This is where Twitter’s very accurate targeting is important and I suspect that this is why the NFL chose to go with Twitter rather than Facebook or YouTube in this deal.
• The first signs are moderately encouraging but the jury is still out as to whether this will drive a revenue increase for Twitter and so I would continue to view the shares at $19.11 with extreme caution.
• Microsoft, Samsung or Baidu are better options in my view.