Twitter (NYSE:TWTR) loves to talk about video content on its platform. It bought the rights to stream Thursday night football last year, as well as several other big events and news coverage. During the first quarter, Twitter streamed 800 hours of live content, grabbing 45 million unique viewers.

But Twitter has loftier ambitions. COO Anthony Noto wants live video streaming on the website 24/7, and the company recently partnered with 16 sports, entertainment, and media companies to do just that. "Our goal is to be a dependable place so that when you want to see what's happening, you think of going to Twitter," Noto said in an interview last month.

Twitter will face intense competition though. It couldn't retain the rights to Thursday night football; (NASDAQ:AMZN) won them for $50 million, more than 5 times what Twitter paid last year. Meanwhile, Facebook (NASDAQ:FB) is investing in sports rights and premium on-demand content. Twitter might not have the budget to compete.

An exterior nighttime view of Twitter's headquarters in San Francisco.

Image source: Twitter Copyright Aaron Durand (@everydaydude) for Twitter, Inc.

Live entertainment or background noise?

Noto's vision for Twitter's video streaming content is that it could be left on all day in the background. ""Focus in on it when you hear something that's of interest, but then maybe not be 100% focused on it when it's not of interest," he said. That type of content is much less expensive to acquire and produce than a big budget one-hour drama. On the other hand, advertisers may be reluctant to pay for ad slots where viewers aren't "100% focused."

But Twitter has to be efficient with its content budget if it's going to fill 24 hours of airtime every day. Taking existing productions and simply paying for the rights to stream the to its 328 million monthly users is one of the most efficient ways to do that. The $10 million it paid for Thursday night football last year, for example, cost CBS and NBC $450 million.

Twitter will use the same principle with some of its new partners. Others, such as its deal with Live Nation, will capitalize on big productions already taking place where Twitter just has to set up cameras and equipment. And some will require completely original productions.

Limited potential ad revenue

The problem with all three productions is there's not a lot of ad revenue in it for Twitter.

When Twitter streamed Thursday night football, it only got a fraction of the ad inventory. Most of it remained with the original broadcaster. For big live events such as concerts, Twitter will own all of the ad inventory, but there's very little space to squeeze in ads. And Twitter's original productions, such as 24/7 news or sports highlights, don't attract the same level of ad spend as big live events such as NFL football.

If Twitter intends for live video to drive meaningful ad revenue growth, it needs to spend heavily on big-budget productions. It needs quality over quantity.

That's what the competition is doing

Facebook is producing new original content for its dedicated video section. Some of the productions are reportedly very high quality, on the level of an HBO or Netflix series. Others are less expensive productions such as you'd find on high-quality YouTube channels. Facebook is also investing in live sports, recently signing deals with Major League Soccer and the MLB.

Facebook is spending hundreds of millions of dollars on video content, with the goal of changing its users' behavior. Instead of happening upon video in their news feeds, Facebook wants users to come to Facebook specifically to watch a video.

That's similar to the user behavior Twitter wants to instill. It wants users to log in to Twitter all day just for the video content. But that requires a big budget, and Twitter doesn't have hundreds of millions to spend.

Meanwhile, streaming video services such as Amazon Prime and Netflix are fighting for viewers' attention, not to mention that traditional television networks are still spending billions on new shows every year. Amazon's decision to buy the rights to Thursday night football should help it attract more international Prime subscribers, which is great for Amazon but bad for companies trying to compete in video streaming. That includes Twitter.

Twitter simply doesn't have the budget to compete with companies like Facebook or Amazon. Even when it went after rights for football, baseball, and soccer, which is arguably one of its biggest priorities, the competition outbid it. Its strategy of a 24/7 video streaming doesn't lend itself to producing significant ad revenue, but it can't afford to buy or produce content that will bring in the big bucks. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.