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Twitter (TWTR) Increases Character Limit for Tweets to 280

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Recently, Twitter Inc. TWTR rolled out a 280-character limit for tweets, doubling it from the traditional 140 limit, in an attempt to make tweeting easier for people and to enable them to express more in a tweet.

The company has been testing the feature in a small group of users since September.

The character expansion has been made across all languages except Chinese, Korean and Japanese. Per Twitter, these three Asian languages convey more information in a single character compared to others and that is why they have not been considered for the increase.

Notably, shares of Twitter have gained 22.1% year-to-date, underperforming the industry’s gain of 28.5%.


Expansion vs Brevity

Twitter’s platform is attractive due to its openness, real-time content, conversational format and distribution ability. Twitter earlier had done away with calculating media attachments and @names in the count, enabling users to express more in tweets and revamped the app to improve user experience.

Nevertheless, hard core Twitter users believe that the traditional limit of 140 characters makes tweets more spontaneous and the ensuing interaction highly effective.

However, as management pointed out on the last conference call, the traditional limit came across as a constraint to many. It was mentioned that users abandoned tweets upon failure to express thoughts within the character limit of 140 in languages such as German.

But management claims to maintain Twitter’s sense of brevity and real time with the latest update.

In a recent blog post, Twitter’s Product Manager Aliza Rosen mentioned that during the experiment conducted over the last two months, only 1% of users reached the expanded character limit compared to 9% of users who reached the limit historically. Thus, time spent editing the posts reduced considerably compared to what they saw before the character expansion.

Per Rosen, during the experiment, it was found that “people Tweeted below 140 most of the time and the brevity of Twitter remained.” Moreover, “only 5% of Tweets sent were longer than 140 characters and only 2% were over 190 characters”, added the post.

Decelerating User Growth – Key Concern

Lackluster user growth remains the primary concern for investors. In third-quarter 2017, Twitter reported adjusted monthly average users (MAUs) of 330 million, up 1.2% sequentially and 4% on a year-over-year basis.

Notably, Twitter has fallen behind dominant names like Facebook Inc FB, which has 2 billion users as well as relatively new entrants like Instagram, which now has over 800 MAUs. Both the platforms also have very high daily active users (Facebook has 1.37 billion DAUs and Instagram has 500 million DAUs).

The company’s advertising revenues have also been declining. Given the shift to auto-play video, which has a lower cost-per-view compared to click-to-play, cost per ad engagement was down 54% in the last reported quarter.

Also, stiffening competition for ad dollars from the likes of Alphabet Inc GOOGL, Facebook and Snap Inc SNAP is highly concerning.

We believe changing features, which are unique to Twitter, might estrange existing users, which isn’t an affordable proposition in the face of decelerating user growth. However, if the findings of the experiment hold true after this global rollout, it might as well lead to user engagement and growth.

Zacks Rank

Twitter sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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