Twitter Inc. Should Fear This Small Test From Facebook Inc.

Twitter's Project Lightning may have some new competition. Image source: Twitter/Adam Levy.

If you couldn't attend Lollapalooza this year, Facebook had you covered. The social network offered a stream of content from the Chicago music festival through its Place Tips feature. The stream included publicly posted photos, videos, and comments, but also focused on your Facebook friends attending the event, differentiating it from Snapchat's OurStory, which debuted with the Electric Daisy Carnival music festival in June 2014, or Twitter's upcoming Project Lightning. The feature from Facebook aims to offer a more personalized version of Twitter's and Snapchat's products.

The focus on curating content around a live event pushes Facebook into Twitter's domain. Twitter prides itself on having the best content, especially when it comes to sports and award shows. Facebook may prove Twitter's management wrong, as a Facebook spokeswoman told The Wall Street Journal, "This Place Tips Lollapalooza experience is just one of the many ways Facebook is trying to help people get the feel of an event when they're not there."

Facebook's push into live event coverage should worry Twitter.

Project Lightning needs to get here lightning fastTwitter's management is excited to introduce Project Lightning later this year. The new feature will highlight several events every day, with hand-curated content from Twitter's vast trove of user-uploaded pictures, videos, and tweets.

Twitter is positioning Project Lightning as a way to get users more engaged and get non-users to visit the website and sign up for Twitter. Considering Twitter's poor user growth and engagement over the past few quarters, a lot is riding on the new feature.

Facebook, comparatively, is slowly pushing into real-time event and news coverage through peripheral features. The Lollapalooza coverage starting July 31 is just one example. Facebook also updated its trending feature recently, which allows users to view topics trending in specific categories such as politics or sports. Facebook, in fact, has grown to become as popular a news source for its users as Twitter: 63% of users receive news from each social network, according to a recent survey from Pew Internet.

Project Lightning will have its own tab, but Twitter plans to run an integrated marketing plan behind the launch of the new feature. This represents the first time Twitter has made a major marketing push. Despite the company's 95% brand awareness, Twitter has done a poor job communicating the value it provides. It thinks Project Lightning will quickly and easily communicate that value.

But Facebook could crush itThere are two things that could hold back Project Lightning from reinvigorating user growth at Twitter. First, the feature doesn't require users to log in. Instead, Twitter is betting that Project Lightning simply serves as an introduction to Twitter for many.

Second, Facebook could introduce a similar feature, leveraging its content and the wide-reaching social graph it already has. Facebook has about five times as many users and its average user has more connections compared with Twitter.

The Pew survey results referenced earlier indicate that Facebook's content is just as good as Twitter's. As a result, Facebook could theoretically put together a product just as good as Project Lightning if it wanted. Facebook has significantly more resources at its disposal compared with Twitter. It has about $14 billion in cash and investments, compared to Twitter's $3.5 billion. Facebook's research and development budget is significantly higher as well.

Facebook's experiment with Lollapalooza is just one sign that Facebook is interested in providing a service similar to Project Lightning. If Facebook continues to expand its Place Tips/Live Event streams throughout the rest of the summer, Twitter may need to push up the release of Project Lightning to fend off the competition.

The article Twitter Inc. Should Fear This Small Test From Facebook Inc. originally appeared on Fool.com.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of 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.