As everybody knows, the constraining investment issue with Twitter (NYSE:TWTR) is the lack of user growth. Despite over 300 million users, the market fears that stagnant user growth will lead to an eventual downfall.
One hope for growing users is the explosive growth in live-streaming video via the Periscope service the company bought last year. Unfortunately, though, the service only has a small lead if any over Facebook (NASDAQ:FB) that recently started a new streaming service. Can Twitter use live-streaming video as a catalyst for higher stock prices this year?
The latest move by the live-streaming service bought by Twitter is to focus the market on a metric called Time Watched. The company used the #YearOne mark for a blog post about this and other Periscope metrics.
The Time Watched metric reflects the usage amount and not the level of users, but the company needs to stick to the metric and portray the value in order to impress Wall Street. One of the problems with the previous management team at Twitter was a constant shift in metrics used to direct investors.
As Periscope turned one over the weekend, the company finally provided some updated metrics on the live-streaming service. According to the blog post, users are now watching LIVE 110 years' worth of broadcasts each day. The number is an impressive leap above the 40 years of video watched per day back in August when the service had 10 million accounts.
The reported number has numerous flaws that under-report the actual time watched. The number only represents the time spent watching live via the Periscope app whether iOS or Android. The number doesn't include the following views:
- Watching within Twitter
- Watching on the web at periscope.tv
- Watching replays
The general assumption is that the Time Watched metric is growing at roughly 10 years per month on average. The number though is far from perfect as the latest ability to watch within Twitter likely diverts a lot of usage. As well, the number sounds impressive though it only adds up to roughly one million people watching an hour a day.
The big downside is that the service appears overly focused on watching live video as opposed to creating the video in a live manner that can be watched at any time in the future. The biggest frustration with the service now is that the inability to record and watch videos beyond 24 hours is preventing the building of broadcast type services that will capture the large user volumes and compel people to download the app.
Facebook Live Threat
While fully understanding that the Time Watched metric better reflects the usage levels of Periscope, the market and advertisers are fully invested in the DAU and MAU metrics. The heavy users sometimes skew the metrics and advertisers prefer the ability to address the whole market and not only a small market of big users.
In this regard, Twitter and Periscope are making a dangerous shift away from the metric that works so well for driving Facebook (FB) to a market valuation of over $325 billion. The social-media giant focuses obsessively on the user metrics desired by marketers. Of course, the main platforms of Facebook, Instagram and WhatsApp primarily require volumes of users for success and the company hopes to parlay those volumes into success with Facebook Live.
In the case of those platforms, it doesn't matter whether 1 billion users have accounts to any individual user. The only thing that matters is how many friends are on the platform to connect with.
In the case of Twitter and Periscope, the more compelling metric is the amount of users with similar interests. In that regard, these services need fewer users to survive and thrive. At the end of the day, it still comes down to the amount of people using the service.
According to this New York Times article, media companies are embracing Facebook Live as the service draws more raw numbers than Periscope. The relatively new service already has E!, Huffington Post and TMZ creating broadcast-quality live shows.
The market for the broadcast shows appear wide open due to a lack of details regarding monetizing the services whether via subscriptions or sharing advertising. Twitter's Periscope has an opportunity to grow users by locking in some high profile media companies, but the company needs to move fast or it risks losing out to Facebook.
Ultimately, the value of any social media service is representative of the combination of the amount of users and the time spent on the service. The market prefers the amount of users so Twitter and Periscope are fighting the trends most used by the market.
Periscope is highly addictive, but the company needs to develop a service for true broadcasters that will provide the large amount of users and eventually the ad dollars. Large media broadcasts would naturally drive more users to Twitter and exponentially grow the value of the brand. The company needs to move fast or Facebook Live will steal the market away.
Twitter remains the best way to play the live-streaming concept as Periscope sees exponential growth. Live will only make a small impact on Facebook's value while Twitter has an enterprise value of around only $10 billion. The company still has a long way to go, but the opportunity is large.
Disclosure: I am/we are long TWTR.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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