Facebook Launches Sports Stadium To Compete With Twitter

  • Twitter has dominated the live news market for a while.
  • Its Periscope acquisition and the Google deal made the company's turnaround story more feasible.
  • However, Facebook Sports Stadium threatens that turnaround story and Twitter's monetization efforts.

In mid-2015, one of Twitter (NYSE:TWTR) long-time investors Chris Sacca wrote an 8,500-word essay expressing his frustration with the company's shortfalls and he made suggestions on how to fix those problems. In the essay, "What Twitter Can Be," Chris Sacca outlined what was going well at Twitter. The positive aspects of Twitter that were highlighted in the essay are:

  1. The pace of product development has accelerated dramatically.
  2. Twitter has shown a willingness to take more risk in making changes to the core product.
  3. Revenue is growing at 74% year over year. (There is no public company of that scale growing anywhere near as fast.)
  4. The management team has stopped selling their stock.
  5. The Google deal is a big win.
  6. Periscope and TellApart are strong acquisitions. (Periscope may prove to be the most important deal Twitter has ever done.)

What made Periscope an extraordinary acquisition was the way it made what makes Twitter great better - Twitter's unique advantage is real-time news. Periscope is the live streaming video mobile app purchased by Twitter in February of 2015 that took Twitter's concept of real-time news to a whole new and exciting level.

No one has ever been able to successfully do "live" like Twitter and Periscope. Facebook (NASDAQ:FB), Instagram, Snapchat and YouTube have tried to make a mark in the "live" business but none of them has come close to Twitter.

But all these might change due to Facebook Sports Stadium - a dedicated place for users to experience sports in real-time with friends and the world. During the announcement on their newsroom page, Facebook outlined that it is the world's largest stadium because of its 650 million sports fans. The company also outlined that people have already being turning to Facebook to "celebrate, commiserate, and talk trash with their friends and other fans." Facebook selling point was the fact that with Facebook all the content relating to the game will be found in one place:

  • Posts from your friends, and their comments on plays
  • Posts and commentary from experts, like teams, leagues and journalists, with easy access to their Pages
  • Live scores, stats and a play-by-play
  • Game info, like where to find the game on TV

But this is not good for Twitter's outlook and its turnaround prospects. Facebook Sports Stadium will negatively affect Twitter because:

  • Facebook will diminish Twitter's dominance in the "live" news business. It will compress the traffic Twitter attracts during live games. This will subsequently diminish Twitter's potential to generate revenues.
  • It boosts Facebook's user engagement and this in turn, drives away some of the advertisers from Twitter. Facebook can engage more people due to its user base. This can lead to better discussions and improved traffic on Facebook and less engagement on Twitter.
  • Facebook casts a shadow over the growth prospects of Twitter over-time. One of Twitters most valuable asset is its user base. Twitter needs to increase its user base to be able to bolster investor confidence in the name and bring back some excitement over its potential growth prospects. But having a competitor like Facebook in the live sports business is not a good thing.


Source: Statista

In addition, mass market platforms like Facebook are likely to attract more advertisers than less used but effective live platforms like Twitter. Because of its 1.55 billion MAU's, Facebook can manage to become the go-to sports platform. There are a lot of sports app's out there such as Fox Sports, CBS Sports, ESPN. If Facebook manages to effectively blend Sports Stadium with Facebook Trending and create a one-stop platform for live games, the company can be able to increase user engagement. Facebook has the user  base to create better and more engaging discussions than Twitter can.

Besides, Twitter's dominance in the live news business made it a very attractive takeover target. Although the company does not currently have any potential buyers, the prospects of an acquisition could have given investors a better return on their investment due to the takeover premium. However, if Twitter loses its dominance, acquisition prospects will decline and if they do occur, the premium will not be as attractive.

Lastly, Facebook Sports Stadium casts a shadow over Twitter's turnaround story. Investors have been looking forward to seeing any strategy that can enable Twitter to optimize its 307 million MAU's.  Initiatives like Periscope and the Google deal were big winners for Twitter. But having a competitor who is well-establish and well-capitalized in the live news space threatens Twitter's monetization efforts.

Nicholas Mushaike Nicholas Mushaike   on Amigobulls :
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