For a long time, the 140-character limit has been synonymous with Twitter Inc (TWTR), just as mobile phone SMS services have always featured a 160 character cut-off. But today, many people find the character limit too restrictive.
As such, there have been calls for TWTR to increase the character limit; with rumors making rounds that the company might extend the 10,000-character limit for its direct messages to tweets.
So Twitter figures the character limit is part of its very DNA. Increasing it to something like 10,000 characters would introduce too much of a mess by making it difficult for users to scroll through their timelines.
Ultimately, such a change would alter the social media site from a place where people go when they need to check what’s going on quickly to a mere news site.
Instead, Twitter has decided to give users another concession.
Can Word Limit Changes Save TWTR Stock?
According to a Bloomberg report, photos and links will no longer count in the 140-character limit starting about two weeks from now. A tweet link is made up of up to 23 characters, so users will now be able to squeeze in maybe four or five more words into their tweets.
The move by Twitter makes some sense considering the ever-growing use of multimedia content including photos, video and links in communication.
But this move is by no means the most significant change that TWTR will be making to its messaging format — the changes the company introduced in its Direct Messaging platform about a year ago claim that title. The company dramatically increased the 140-character limit for private messages to 10,000 in July last year.
The move was received positively by brands that use Twitter primarily as service tool because it allows for more convenient communication between businesses and their customers. People can now write long-tail texts instead of those short and pesky back and forth messages. Twitter then spiced things up a bit by launching a Quote Tweet option that allows users to add up to 116 characters to retweets.
Early this year, Re/code reported that Twitter was tinkering with the standard 140-character tweet to come up with a new trim. The new iteration will display the usual 140 character tweets, but allow senders to use some kind of call-to-action that will expand and reveal more content when users click on them.
Twitter has yet to bring this new feature to the table. Maybe this has something to do with the fact that users today easily sidestep the character limit by attaching images of extra text to their tweets so such a feature would hardly be earth shattering.
TWTR has been making incremental changes to its platform as it tries to make it more intuitive and easier to use. A common rant about Twitter is that the platform is not as straightforward and engaging to use as, say, Facebook Inc‘s (FB) platform. Consequently, the company has had to slog trying to expand its user base.
So are these changes working for TWTR stock?
It’s perhaps too early to say conclusively, but they very well could be if the last quarter is any indication. After several quarters of stagnant or declining users, Twitter recorded a small but significant user growth figure during the first quarter. The company finished the first quarter with 310 million monthly active users, a 3% improvement over last year’s corresponding quarter and 5 million more than the previous quarter.
Despite the positive user trend, Twitter stock still got crimped, tanking 15% after the company failed to meet top-line expectations despite beating on the bottom line. Twitter reported revenue of $594.5 million, good for 36.4% year-over-year growth, but $13.3 million short of the consensus on Wall Street. Twitter blamed the revenue shortfall on lower-than-expected spending by brand marketers.
Meanwhile non-GAAP earnings per share of $0.15 was more than double last year’s reading of $0.07 and handily beat Wall Street expectations by 5 cents. Twitter posted a narrower net loss of $79.7 million compared to a loss of $162.4 million a year ago.
The company was able to pull of this feat through cost discipline in its two biggest line items: marketing expenses and research and development, which grew 29% and decreased 18% year-over-year, respectively … each slower than top line growth.
Time to Jump Into Twitter Stock?
TWTR stock has cratered 36% YTD and 60% over the past 12 months mainly on concerns about slowing user growth. The fact that the company has managed to reverse this trend certainly bodes well for TWTR stock.
Unfortunately, new concerns are emerging.
Twitter blamed weaker brand advertising revenue growth for its revenue miss. This appears to be consistent with a recent RBC survey of 2,000 marketing professionals.
The survey found that a full 23% of marketers who advertise on Twitter plan to cut their spending on the platform over the next 12 months due to lower return on investment. That compares poorly with 9% of Facebook and 10% of Alphabet Inc (GOOG, GOOGL) marketers who plan to cut their spending on the respective platforms.
Twitter said during its earnings call that it remains confident that its product roadmap will help pull back marketers. Meanwhile, the company is succeeding in monetizing logged-out users, and said that website CPC rates for logged out users are coming in roughly at the same rate as for logged-in users.
Twitter is certainly making progress, but TWTR stock remains a mixed bag at this point. It might be prudent for investors to remain on the sidelines for maybe another quarter to check and see whether the company can build on last quarter’s user growth while improving its brand advertising revenues.
As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.