TWTR Stock: Twitter Tests Facebook-Like Redesign

by Tom Taulli | February 12, 2014 3:01 pm

According to a report from Mashable, it looks like Twitter (TWTR[1]) is experimenting with a major redesign of its user interface (UI).

TWTR-stock-FB-stock[2]The irony is that it looks a lot like Facebook (FB[3]). Although, the most interesting thing is that the redesign comes only a week after TWTR stock got crushed because of its disappointing earnings report, which showed lagging user growth. Oh, and roughly the same time, FB stock soared – racking up many more users.

Mashable has a look at the new Twitter redesign[4] that’s being tested. As you can see, it’s much different from the original setup of a single-column stream of tweets. In its place, Twitter now spreads tweets around the page.

What’s more, each tweet is larger and generally has a photo. There is also a capability for pop-up notifications, which allow for direct messages. But will any of this really help TWTR stock?

All in all, the moves are a way to help make the user experience simpler and more visually appealing. Keep in mind that such UI issues were a contentious topic on the earnings call and probably was a key factor in the drop in TWTR stock.

Yet the most obvious benefit of the Twitter redesign is that it provides more real estate for placing ads. Currently, the company inserts them within the feed, such as with “sponsored tweets.” But then again, investors in TWTR stock may not be too concerned with monetization.

Let’s face it, the fourth quarter showed that the company knows how to get advertisers to shell out big bucks. Revenues soared by 116% to $243 million[5], which was well above the Wall Street consensus of $218 million. During the quarter, TWTR rolled out a variety of ad products like TV Conversation Targeting, Tailored Audiences, Conversion Tracking and Promoted Accounts in Timeline.

Facebook, on the other hand, has been maintaining more of a balance between monetization and user growth. It certainly helps that the company has a product-oriented CEO, Mark Zuckerberg, and a COO, Sheryl Sandberg, who has strong credentials when dealing with the online ad business.

As I mentioned in a recent post for the IPO Playbook[6], TWTR stock is likely to suffer because CEO Dick Costolo is more of a Sandberg than a Zuckerberg. And the performance of FB stock is a major indication of this.

But taking a look at the Twitter redesign, it is really just a rearrangement of content. In other words, it doesn’t address the main challenge: How does Twitter get new users? Despite the strong brand, many people still aren’t sure why to sign up for it. “What’s the point? What’s a tweet or a hashtag anyway?” With Facebook, there are no such problems, as there are more than 1.23 billion users on the service — and they are engaged.

So until Twitter finds a way to make its service more understandable and compelling, TWTR stock will probably continue to lag, and FB stock will have more room on the upside.

Tom Taulli runs the InvestorPlace blog IPO Playbook[7]. He is also the author of High-Profit IPO Strategies[8]All About Commodities[9] and All About Short Selling[10]. Follow him on Twitter at @ttaulli[11]. As of this writing, he did not hold a position in any of the aforementioned securities.

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