Twitter Inc.'s New Feature Is a Game-Changer

In one swift move, Twitter (NYSE: TWTR  ) just became more social, more enticing for new users, and a more formidable competitor to Facebook's (NASDAQ: FB  ) Instagram. On Wednesday, Twitter rolled out an update for its iOS app that enables members to tag up to 10 people in a photo and post as many as four photos in one tweet. Here's why it's so important.

Source: Twitter.

But first, more details on the new features.

Twitter photos just got more social
Until now, Twitter has made tagging people in photos nearly impossible. With tweets limited to 140 characters, and each tagged person reducing affecting count, tagging multiple users left very little room for explaining the photo. But now users can tag up to 10 people, and none of the tags will affect character count.

Source: Twitter.

Though the new feature is only available on iOS today, the company says the improved photo sharing is coming to Android and Twitter.com soon.

Boosting engagement when Twitter needs it most
Several concerns have irked Twitter investors in the last four months, sparking a sell-off that has left shares trading about 33% lower today from a 52-week high reached in January. Fortunately, improved photo features should help Twitter address these investor anxieties.

The particular problems Twitter is facing are slowing user growth and worsening retention in recent years. In Twitter's fourth quarter, for instance, its sequential monthly active users, or MAUs, growth fell for the fourth quarter in a row to 4%, down from 6% in Q3. Further, recent data from Twopcharts, a website that monitors Twitter activity, suggests that retention of newer members is becoming more difficult.

Source: Twitter. Photo by Marisa Williams (@everydaydude).

Twitter's new photo features address both of these concerns. Not only should it boost engagement from existing members, but making photos far more social could also create greater appeal for newer members, helping retention. The importance of photos in social services is evident by their success and importance in other platforms like Facebook, Facebook's Instagram, and Snapchat. Instagram, for instance, is growing faster than Twitter. The service added 50 million MAUs in the past 12 months, reaching 200 million this month. In a similar time span, from Twitters second 2013 quarter to its fourth, Twitter added 23 million MAUs. Further, illustrating the importance of photos in the social landscape, Facebook even offered $3 billion to acquire photo-sharing app Snapchat.

A better Twitter
Twitter is undoubtedly more competitive with this new feature. While the update gives Twitter shareholders another reason to hold onto the stock in spite of its lofty valuation, investors debating buying into the stock might want to wait for evidence that Twitter can become more than a niche social player before considering buying shares -- or a major pullback in the stock price could also serve as a reason to buy.

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