Why Is Twitter Increasing Focus On Live Streaming?
Twitter (NYSE:TWTR) is rapidly expanding its live streaming video content. The company recently signed a deal with Bloomberg to stream three of its daily news shows including “Bloomberg West” on its platform. Twitter and Bloomberg will share revenue on ad packages sold with these shows. This agreement comes on the back of a recent deal signed by Twitter with CBS, whereby it will stream both the Democratic and Republican national conventions. The company streamed videos of Wimbledon games on its platform and is also in talks with the NBA, Major League Soccer and Turner for more streaming rights. Twitter is aggressively pursuing streaming rights for popular events, hoping that making popular live content freely available will attract more users to its platform. While these feeds are currently available to users who do not have an account, as Twitter increases the live video content available on its platform and builds a social experience around it, it should be able to get more users to join.
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Differentiated Content Can Expand User Base
As Twitter struggles to grow its user base, and seeing tough competition from the likes of Snapchat and Facebook, the company needs to differentiate itself from competitors to attract users. Live streaming of popular sports and other events is one strategy which could work in its favor. While users might not be interested in watching entire games on small mobile screens, it gives them the convenience of being able to watch on the move without any additional subscription costs. This option might also attract the younger generation, many of whom are increasingly preferring streaming services to expensive Pay-TV subscriptions. The ability to watch an event and discuss it live with friends through tweets makes the experience more social, and could keep users hooked. Twitter appears to be banking on this strategy to attract more users and keep them engaged. As it pitches itself as a “news” platform and the quickest way to get information around the world, live streaming of important news and events can keep its audience engaged. While Facebook is also looking to capture users via live videos, Twitter’s focus on gaining streaming rights ahead of competition could give it a leg up.
According to our estimates, advertising revenues from the U.S. account for nearly 50% of Twitter’s valuation. The company’s U.S. average monthly active users are a key driver for this segment, and we expect these users to increase moderately from around 66 million in 2016 to 78 million by the end of our forecast period.
If Twitter is able to attract more users to its platform through these initiatives, and increase its monthly active users to around 90 million by the end of our forecast period, there could be a 10% upside to our price estimate.
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