Twitter Reportedly Becoming More Like Facebook, But Move Could Backfire

Reports suggest the struggling social media site will allow users to post slightly longer messages, but there's a risk to changing something that's been a key reason for its success.

Author:: Chris Nolter
Publish date:: May 17, 2016 3:53 PM EDT

Shares of Twitter (TWTR) - Get Report floated higher Tuesday, following reports that Jack Dorsey will tweak rules to let tweets express a little bit more.

The company declined to comment on a Bloomberg report that it will stop counting Internet links or images against its parsimonious limit of 140 characters. Twitter stock rose 7 cents, or about .5%, on Tuesday afternoon just before the close to $14.36. Shares had been as high as $14.59.

Twitter has struggled to grow its user base, and has at times faced criticism that it was borrowing too heavily from Facebook's (FB) - Get Report playbook as it tries to gain mass appeal.

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"Product-wise, not counting links and photos against the 140 character limit is a significant improvement that will make its current user base very happy," 451 Research analyst Raul Castanon-Martinez wrote in an email. "Business-wise it will have a limited impact in terms of users or monetization in the short term; unfortunately that is what investors are looking for."

Twitter faces decelerating user growth, which has lessened its appeal to advertisers. Monthly average users increased by 5 million in the first quarter of 2016 to 310 million. The company did not provide guidance on how many monthly average users it expects in the second quarter.

The social media group instead touted a deal to stream 10 National Football League games and updates to the timeline that lists tweets during a first-quarter call.

Wells Fargo analyst Peter Stabler suggested that significantly boosting users is a "major challenge" in a note after the first-quarter results.

"Though we see a [management] team focused intently on driving user growth and engagement, we believe product changes haven't been significant enough, and that Twitter's core product remains far too difficult for a mass user base," Stabler wrote.

It may be tempting for Twitter to model itself on Facebook, which reported a 15% first-quarter gain in monthly average users to 1.65 billion.

But 451 Research's Castanon-Martinez said that would be a "huge" mistake. "Twitter should focus on doing what made it successful in the first place instead of trying to emulate Facebook," he wrote. "The 140-character limit and the real-time nature of Twitter are what makes it unique. Facebook has tried to emulate this with limited success."

Twitter provides a unique user experience that has caught on with celebrities and brands, he wrote, and changes could disrupt what success it has achieved.

When speculation arose earlier this year that the company would model its timeline closely on that of Facebook's, Dorsey took to Twitter to declare the social media site's commitment to its identity as a live stream of information.

"Pushing Twitter to become more like Facebook i.e. growing the number of eyeballs and user engagement could be a tremendous mistake," he said. "Twitter cannot beat Facebook at its own game but no one has done what Twitter does either."