Twitter: The King Of Live

| About: Twitter, Inc. (TWTR)


Twitter managed to strike a broadcast deal with the NFL despite facing competitors such as Facebook, Amazon, Verizon and Yahoo.

Granting a deal to a beleaguered micro-blogging site with ~311% less MAUs than its biggest competitor implies the decision transcends money and user base.

These implications are critical for investors because they reaffirm the idea that Twitter is the king of live: live commentary, live conversations, live connections and live events.

Consequently, as Twitter continues to develop products that reinforce its dominance in live, live will help bolster investor and advertiser confidence in Twitter.

The National Football League struck a broadcast deal with Twitter (NYSE:TWTR) to stream 10 Thursday NFL games during the 2016 season. Twitter will pay $10 million for the global rights.

For the deal, Twitter faced competitors who are well capitalized and have larger user bases, including Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Verizon (NYSE:VZ) and Yahoo (YHOO).

Consequently, one would wonder why Facebook did not win the contract. Facebook has ~311% more MAUs than Twitter. As of December 2015, Facebook had 1.04 billion daily active users. Therefore, if the NFL was looking for scale only, Facebook could have been the logical choice. This is why we believe there is a fundamental reason that influenced this decision. A decision that transcends scale and money - Twitter's dominance in live news.

Twitter received the contract because it is still the King of Live News. NFL spokesman Alex Riethmiller confirmed Brian's comments to NPR that Twitter's bid was, in fact, not the highest that the league received. The NFL has streamed individual games before, but this deal marks the first season-long streaming deal in addition to its regular TV and cable broadcasts.

Consider this, via Bloomberg:

"We did not take the highest bidder on the table," said Brian Rolapp, the NFL's executive vice president of media, of the Twitter deal. "The platform is built around live events already. We want to see how they use the unique platform, and syndicated tweets all over the Internet is going to be interesting."

This deal is an endorsement for Twitter from the NFL signifying that Twitter can be the go to platform for live sports. Borrowing the words from the NFL's executive vice president of media, "the platform (Twitter) is built around live events already."

In addition, there is a chance that Twitter might get another NFL deal down the line. If this deal is lucrative to both sides in the next five years, we believe Twitter can get a piece of the Sunday and Monday games by 2021.

"The league is using Thursday night games, which draw smaller audiences than the contests on Sundays and Mondays, to experiment with different kinds of media, distribution models and technologies. By the time the NFL's biggest broadcast contracts expire in 2021, it will be prepared to sell a broad array of digital rights - and make more money" (via NPR).

This is critical for investors because it allows them to position Twitter exactly where it should be - a leader in live news/events. For instance, the NFL deal reiterates what we have already seen, but not paid significant attention to. Twitter has been the platform of choice for presidential candidates to voice out their opinions during live debates in opposing parties. This level of engagement is not comparable to any other site and makes the Twitter brand more relevant.

But the benefits of the NFL deal transcends reaffirming Twitter as the dominant player in live news, it also has the potential to help Twitter increase its total MAUs. A lot of Americans are passionate about American soccer. We believe that this strong passion will help increase traffic to the site and hopefully new users might continue using the platform on a monthly basis thereafter. In addition, Twitter has taken other steps to improve its position in live. From breaking news to sports, Twitter is making strides to own live: live streaming videos and filming off Periscope. Furthermore, Twitter Moments was a clear message that Twitter wants to find new ways for people to get the best of Twitter "in instant." Moments features the best stories happening on Twitter, curated by Twitter and select partners.

This increased traffic will be essential in generating more revenue for Twitter via its Google (NASDAQ:GOOG) (NASDAQ:GOOGL) partnership and subsequently increase advertisers. Twitter will be able to cannibalize on non-users being siphoned from Google Search. Twitter has always argued that its audience goes beyond the 320 million MAUs. Twitter's partnership with Google will allow the platform to generate new traffic from Google search. Twitter argues that when you aggregate the number of users away from the service, its audience grows to 800 million. We expect advertisers to see this as positive news that could allow them to reach a broader, but targeted demography. As a result, we believe the deal has the potential to bolster investor and advertiser confidence in Twitter moving forward.

The deal may pave way for Twitter to be the platform of choice for other activities ranging from politics to sports. The deal could help Twitter make similar deals. In addition, Twitter can also attract new advertisers whose target market is anything sports-related. This is a great achievement for Twitter for the fact that it managed to get the deal despite of the strong competition. Facebook has been attempting to get into the live news business for a while. One of its strategies to do so was the creation of Facebook Stadium. Facebook was hoping to leverage its 650 million sports fans to compete with Twitter on live news. As a result, Twitter winning the contract is a big deal.

Lastly, one of Twitter's biggest challenges was defining its vision to investors. On its Q4 2015 earnings call, the word "live" was used 42 times by Twitter executives: live commentary, live conversations, live connections and live events. Positioning itself as "the platform of now." But the direction has now shifted and the vision has been defined - Twitter is live. This is a niche market where Twitter can be competitive against giants such as Facebook. The NFL deal reiterates this assertion that Twitter is the King of Live.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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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