Instant Analysis: Twitter Buys Magic Pony to Boost Video

Image source: Twitter.

What happened?

This week,Twitter purchased the London-based, machine learning company Magic Pony Technology. Neither company disclosed the official price, but TechCrunch sources said it was up to $150 million. Machine learning is becoming an increasingly important part of Twitter's technology, and it will help the company serve up relevant content, particularly video, to its 310 million users.

Magic Pony's technology will be placed in Twitter's Cortex group, a group of data scientists, engineers, and machine learning specialists within the company. The team will work in Twitter's London office.

In a recentstatement,Twitter CEO Jack Dorsey said, "Magic Pony's technology -- based on research by the team to create algorithms that can understand the features of imagery -- will be used to enhance our strength in live video and opens up a whole lot of exciting creative possibilities for Twitter."

Magic Pony adds to previous machine learning acquisitions by the company, including Madbits in July 2014 and Whetlab in June 2015.

Does it matter to shareholders?

The purchase matters to Twitter shareholders for two main reasons: First, Twitter is investing in machine learning just as other companies are building out theirs as well. As content becomes more complex (shifting from text to video), machine learning is becoming essential for tech companies to be able to categorize their content.

Secondly, rival Facebookhas led the charge in video as of late and is quickly amassing a video content empire. Facebook users watch three times as much live video as non-live video on the platform, and users are uploading 75% more videos worldwide than they did last year.

That has contributed to Facebook's nearly 8 billion video views per day, leaving Twitter trying to play a massive game of catch-up.

Implementing Magic Pony's technology should help Twitter deliver better quality videos with less data usage. It's a step in the right direction for a company that needs to find new ways to increase its users and keep current ones engaged, but I'm skeptical about whether the purchase will be enough to help Twitter catch up to Facebook's video dominance.

The article Instant Analysis: Twitter Buys Magic Pony to Boost Video originally appeared on Fool.com.

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.