Re/Code is reporting that Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Twitter (NYSE:TWTR) are working together on a joint venture that would compete with Facebook's (NASDAQ:FB) Instant Articles. While both Google and Twitter have declined to comment Re/Code has broken stories in advance of official commentary before and I believe this lead to be credible. That said, this is a meaningful development in the content universe and one that could have far reaching implications based on the size and capacity of the joint venture participants. Let's break it down.
First, this is an acknowledgement that Facebook is the biggest individual threat to both Twitter and Google's business models. Maybe not right now, maybe not as-is - but this is an acknowledgement that a threat (Facebook's growing ever more all-inclusive platform) is growing stronger and if nothing is done about it that threat could become too strong to unseat. The fact that Google and Twitter are the companies doing the acknowledging is powerful. Don't understate what this means symbolically and what this means literally. This is indicative of the tectonic shift in content marketing taking place, one that sees Facebook emerging stronger and stronger. If you haven't yet, you should take notice of this shift as the formerly broken up content marketing land masses are seemingly coming together in a Pangea which Facebook will have majority ownership over.
Both Google and Twitter (Twitter especially with Facebook recently entering the real-time market) are trying to combat Facebook's growing ownership of the content/content marketing space. Facebook, as alluded to above, now has a competitive (if not leading) presence across the entire content ecosystem. Very recently Facebook's announcement of Instant Articles was the latest shot fired in the arms race to aggregate the most content or in the race to refer users to the most content. Both are platform value-prop drivers, illustrators and visibility enhancers that will not be taken back easily once acquired. Regarding Facebook's acquisition of both - according to traffic analytics firm Parse.ly Facebook is now the leading traffic source for news sites, passing Google. Don't think this isn't something that Google has taken notice of - I can assure it has.
That said, in an effort to slow the growing juggernaut and to give a second option to the current Instant Article monopoly that Facebook owns (yes, Apple (NASDAQ:AAPL) has a similar service but it isn't expected to aggregate like Facebook) Google and Twitter will look to deploy an open source publishing tech that will offer an Instant Article-like service to those willing to take it. Even better for publishers, neither Google nor Twitter will look to host the content - a big difference between the open source project and Instant Articles at Facebook. Why does this matter? A few reasons.
First, the Google/Twitter option (which hasn't been branded yet) won't alter the ad structure of the Instant Article-like display. This means the original ads slated for display on the article being shown remain untouched, as intended. That matters to the content creator. Second, this gives publishers a way to begin to fragment a growing dependence on Facebook-hosted content. Becoming essentially indentured by Facebook is scary for publishers to say the least in that this obviously reduces negotiating power to zero. Publishers are currently fighting the "should I or shouldn't I" question when it comes to leaning even further into their already most important platform. Facebook hasn't "turned" on the publishers yet, and there's no indication it would use its powers for evil, but it more than stands to reason that it could considering its reach and importance.
Re/Code is reporting that the Google/Twitter JV is launching with a small contingent of early adopters "in the fall," so we'll have to wait and see exactly what this Instant Article-like service will look like and how it will be received before making final judgments. One thing is for sure though, this JV could be the beginning of a long line of JVs between these two shared interest parties. Twitter does a few things that Google doesn't and clearly that statement is true in reverse. I think that the model layover potential between the two, which has been speculated on at exhaustive length in the now tired Google/Twitter M&A speculation of past, could yield some really, really interesting spinoffs if this product launch goes well. It might (prepare the tar and feathers) even lead to an eventual M&A opportunity. In any case, this is a development I'll be following very, very closely.
Good luck everybody.
Disclosure: I am/we are long FB, 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.