Why Is Twitter Inc. Worried About a Start-Up Video Streaming App?

By Markets Fool.com

Twitter has taken steps to neuter a video-streaming service that was taking advantage of its network.

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The video service, Meerkat, allows users to live videocast directly to Twitter. It creates a new level of functionality for the social media company, but also undermines it. Until Twitter cut off Meerkat's access, the service worked by accessing the social media network's "social graph," to notify a user's followers that the person was live streaming.

That was a great deal for the streamer as it offered a cheap, easy way to livecast video -- sometimes even from a phone -- without having to do much marketing. The arrangement was not as good for Twitter because it took people away from the continuous conversation nature of the site (which could harm ad sales opportunities).

It was a backdoor play for Meerkat, and the social media giant took notice. As the piggyback (some use the term "parasite app") rose in popularity, Twitter cut off its access to the social graph. The messaging site also bought Periscope, a company that offers a similar service to Meerkat.

Perhaps not so coincidentally, Twitter terminated Meerkat's social graph access not long after its deal with Periscope became final on March 13. The social media site denied any connection, tellingFast Companythe move was "consistent with our internal policy."

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Meerkat has not been shy in linking its future to Twitter. This is the key message on its homepage. Source: Screenshot.

What happened?
Meerkat had a fast-building buzz that built into an explosion of mainstream media coverage in conjunction with this month's South By Southwest music, film, and technology conference in Austin, Texas. That, coupled with the Periscope acquisition, likely led Twitter to act, shutting down down Meerkat's social graph access with two hours notice.

"We are not nave, we knew it was coming,"Meerkat co-founder Ben Rubin told Fast Company. "We thought that we would at least get a week notice -- a fair game."

"We are limiting their access to Twitter's social graph, consistent with our internal policy. Their users will still be able to distribute videos on Twitter and login with their Twitter credentials," A Twitter spokesperson told ABC News.

You can still use Meerkat to stream on Twitter, but it's a much more manual process to build an audience. Twitter has not made any statements about its plans for Periscope, but you can bet it will include access to the social graph in an attempt to win over Meerkat users.

What do this mean?
Twitter is attempting to protect its network and make sure it offers services users want while controlling those services.

"I get it that when you own the house, you own the rules," Rubin said. "You can say, I'm about to launch my own app, and I don't want you to have the graph. But I think the two hours was a little aggressive and not working toward building a community."

It was a low blow by Twitter, but it was also the correct business move (however, it might make other app makers hesitant to develop tools that work within the social media site). For Meerkat, it means an end to a free ride and an opportunity to see whether its app is sticky enough to draw an audience without Twitter's help.

Who wins this fight?
While Meerkat's management acts like Twitter's move isn't a big deal, it's a huge blow to the company.

"It certainly wouldn't be the first time something like this has happened (RIP TwitPic)," wrote Darren Orf atGizmodo. "With Periscope having most favored nation status with Twitter, Meerkat's chance of succeeding as an app is undermined from the get-go."

It's hard to see how Meerkat survives this; if Twitter offers the same, or better, functionality on its own, few people will remember it stomped an innovative company to death to do so. Twitter has the audience, so it has the power.

That makes it the winner here unless Meerkat has become so beloved that its users revolt. That's unlikely for a hot, but new, app, so Twitter will likely take the day and emerge from this dustup stronger.

The article Why Is Twitter Inc. Worried About a Start-Up Video Streaming App? originally appeared on Fool.com.

Daniel Kline owns shares of Apple. He has to regular cats. The Motley Fool recommends Apple and Twitter. The Motley Fool owns shares of Apple 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.