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Twitter Inc. Dives Deeper Into Video With Periscope

By Adam Levy - Mar 12, 2015 at 2:00PM

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Twitter's latest acquisition bolsters its focus on video.

Last month Twitter (TWTR -0.23%) quietly bought live-video streaming startup Periscope, which had yet to even publicly release an app. Twitter has focused heavily on video in 2015, and Periscope is another step toward offering more comprehensive video capabilities within Twitter's app, as well as in new apps. The early success of Meerkat, a video app that attracted 60,000 views in just the past couple of weeks, bodes well for Twitter as it attempts to increase the amount of video its users upload to its platform.

Starting to build an ecosystem
At Twitter's analyst day last November, Twitter said that it plans to start releasing new apps in the future to complement its flagship app. This is a strategy that Facebook (META -0.79%) has pulled off to great success. With more apps, users have more opportunities to interact and engage with the company's product.

Presently, Twitter has just two apps, its flagship app and Vine. Comparatively, Facebook has ten consumer-facing apps, and six apps for businesses. Clearly, Twitter has a bit of catching up to do.

Periscope fits extremely well into Twitter's budding portfolio. Similar to Vine, the app is video-centric, so it's familiar ground for Twitter. Additionally, the app can be designed to integrate directly with Twitter, similar to Vine's integration.

Most importantly, though, is that Periscope will capitalize on Twitter's biggest strength. Twitter is one of the top sources for real-time up-to-the-minute information. Live streaming video fits the bill perfectly. Twitter has always said that news breaks on its platform, and soon it will have millions of individual video crews to cover that news.

The importance of video
Both Twitter and Facebook have stepped up efforts recently to encourage their users to upload more videos directly to their platforms. Facebook's efforts have been rewarded, with the company announcing in its latest earnings call that users stream over 3 billion videos on its platform every day. That's triple the amount from last summer.

Twitter has been quieter about engagement with video on its platform, but it's accelerating efforts to get users to produce more. It started testing video advertisements last year, and continued to make incremental improvements to Vine. Earlier this year, the company added native video capturing capabilities within its flagship app -- something it promised at the analysts day in November.

Both companies are attempting to increase the amount of video advertising they sell, since they typically carry a premium over static ad units. In order to make video ads seem as natural as their native static ads, however, both social networks need users to be used to seeing videos that aren't ads.

Mobile video ad spend in the U.S. reached an estimated $1.5 billion last year. The market is expected to quadruple by 2018, reaching $6 billion. To put that in perspective, Twitter is expected to generate just $2.4 billion in total revenue this year. Capturing a significant share of the growing mobile video ad market will enable Twitter to continue growing revenue at a rapid pace.

Apps like Meerkat will certainly help with the amount of video on Twitter. But with Periscope, Twitter will be able to provide massive scale and exercise more control over how live videos are integrated with Twitter. Down the road, Twitter may even be able to monetize the live-video streams through curation, syndication, or advertising.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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