Where Twitter (TWTR) Is Quietly Destroying Facebook (FB)
Losing on all other fronts, live streaming offers Twitter shareholders a ray of hope.
By John Divine | Staff Writer Aug. 23, 2016, at 9:53 a.m.
Twitter versus Facebook.
Contrary to popular belief, Facebook isn't dominating Twitter in every category.
Facebook Inc (ticker: FB) isn't, by most definitions, what one might deride as a "loser." Especially in a head-to-head matchup against its struggling rival Twitter Inc (TWTR).
But even winners can't win 'em all, and Facebook today finds itself woefully behind Twitter in one vital area: live streaming sports. Twitter has booked streaming deals with all four major sports leagues (the MLB, NHL, NFL and NBA), and will also live-stream more than 300 college sporting events.
The underdog, thus far, is walloping the favorite.
By all conventional measures, the two companies aren't even in the same league: Last quarter, Facebook grew its user base by 15 percent to 1.7 billion; Twitter's rose 3 percent to 310 million. Facebook's revenue surged 59 percent to $6.4 billion; Twitter's increased 20 percent to $602 million. Facebook generated $2.06 billion in profits while Twitter lost $107 million.
The list goes on and on.
But one thing TWTR has been able to do that FB hasn't is lock down a laundry list of enviable streaming deals with major sports leagues and broadcasters. And the fact that Twitter secured those deals and Facebook didn't is a bigger failure than one might expect.
Ad dollars don't grow on trees. As free services, Twitter and Facebook keep the lights on by serving their users ads. That's a great model – until you get so big that your user base stops growing. With roughly half of the world's online population already on Facebook, FB is theoretically close to capacity. And Twitter's reliably pitiful user growth suggests that its platform, too, has found maximum reach.
As public companies with investors to satisfy, that defeatist philosophy won't work.
To keep revenue growing briskly, Facebook, the other titan of online advertising, Alphabet Inc (GOOG, GOOGL), and Twitter, are all battling for the sizable portion of ad budgets that marketers typically reserve for television.
With the cord-cutting revolution underway and streaming web video only getting more popular, it makes sense. But to successfully court TV ad dollars, TWTR, FB and GOOG need TV-like programming. And what kind of TV programming typically commands some of the highest rates and largest audiences? Live sports.
Facebook pays a steep opportunity cost. Twitter should never have been able to strike so many streaming deals. Facebook's deeper pockets and substantially bigger audience pool should've given it more than enough pull at the bargaining table to strike deals with the major sports leagues.
Now, not only is FB missing out on the traffic and ad dollars that it would've pulled in from streaming these contests, but it's giving Twitter – which has seen its stock price fall roughly 30 percent over the last year – a lifeline.
TWTR is already reaping benefits from its newfound status as an online streaming platform: The company is reportedly in talks with Apple (AAPL), which allegedly wants to put the Twitter app on the Apple TV because of its live sports deals.
"The company has really kind of refocused its entire business strategy on the concept of live," says Scott Kessler, equity analyst at S&P Global Market Intelligence.
While Kessler is skeptical that huge numbers of people will want to watch, for instance, an entire NFL game on Twitter, "What about that person who's on the bus ride home from work? Or the person who's waiting in the emergency room?" Kessler says. "For those folks, it's gonna be a great option."
Still not the king. Early inroads aside, it's way too early to crown Twitter the victor of anything – it's simply on the right path, and that's a little surprising. Still, don't expect Facebook to go down without a fight.
Facebook has already committed about $50 million to over 100 celebrities and media outlets to broadcast original video content via Facebook Live, according to the Wall Street Journal. And it's experimented here and there with streaming live sports, too: In April, Facebook streamed a professional women's soccer game that reached an estimated 554,000 unique viewers; the same game was broadcast on YouTube and garnered about 76,000 viewers.
Still, Twitter's early agreements – and the fact that the company was reportedly able to win out over larger competitors like Amazon.com (AMZN), Verizon Communications (VZ) and Facebook on its NFL deal in particular – are impressive.
Frankly, losing these streaming contracts to Twitter makes Facebook look bumbling and weak. But CEO Mark Zuckerberg has given shareholders ample reasons to trust him, so issuing a definitive verdict at this stage in the game would be irresponsible.
After all, FB could be watching from the sidelines in the early innings, only to swoop in later and steal Twitter's relationships should it prove successful. But for now, it looks as if the underdog has the upper hand in streaming.
