Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) have been copying each other for years. Facebook wants to do more things in public, added hashtags last year, and launched Instagram video to compete with Vine, among other examples. Twitter redesigned profile pages to resemble Facebook's and considered launching a Facebook Home-esque customization for Android.
Well, Twitter is considering what could be the most significant borrowed idea yet: filtering the Timeline and sorting tweets by relevance.
One of these is not like the other
One of Twitter's historical differentiators has always been that it displays an unfiltered feed of content organized in chronological order. In contrast, Facebook's News Feed uses an algorithm in an attempt to display what it thinks will be socially relevant to the user, which effectively filters out some content.
Facebook is known for adjusting this algorithm regularly. The most recent example is that Facebook just said it would be cracking down on "click-bait" articles in the hopes of providing interesting and relevant content to Facebookers. Much like when Google tweaks its search algorithms, Facebook adjusting its algorithms has implications that reverberate throughout the Internet.
Twitter has now acknowledged that an unfiltered feed shown in chronological order may not offer the "most relevant experience for a user," according to new CFO Anthony Noto. Both Twitter and Facebook exhaustively test new ideas within small groups before rolling out major changes, so any changes would be gradual.
He didn't say "no"
As Twitter's user growth slows, the company continues to consider ways that it can improve its core product as a way to attract more people to the platform. This summer, COO Ali Rowghani left the company as that deceleration claimed its first casualty.
Improving the product is also one way Twitter hopes to convince unregistered visitors to create accounts and login. Management estimates that Twitter's total audience including these unregistered visitors is two to three times what its monthly active user base suggests. CEO Dick Costolo also hinted that algorithmic timelines are on the table:
On your second question, algorithmic Timelines, for example, versus manually curated follow lists. I think it's fair to say that we're not ruling out any kinds of changes that we might deliver in the product, in service to bridging that gap between signing up for Twitter and receiving immediate value. You will see a number of kinds of experiments that we produce there.
Let the experiments begin.
There's more where that came from
There are other product-level improvements that Twitter is looking at, too, such as bolstering the service's search capabilities and expanding direct messaging capabilities.
These are two other areas where Facebook is ahead. Facebook announced its Microsoft Bing-powered Graph Search in early 2013. Facebook Messenger has been around for ages, and is not an obligatory stand-alone app for users wanting to use it on the go. The $19 billion WhatsApp acquisition is still in the pipeline, which will strengthen Facebook's messaging position in international markets.
Why it matters
At the end of the day, user monetization is what investors should be paying attention to, since the whole point of product improvements is to increase engagement and subsequently monetization. This is the most important area where Twitter enviously looks to Facebook as a role model.
Comparing the two companies takes a little extra prorating legwork due to the way they each report operating data. Last quarter, Twitter saw prorated ad revenue per MAU of just $1.02 worldwide, which is less than half of the $2.24 in ARPU that Facebook generated per MAU. It's no wonder why Twitter is trying hard to copy Facebook.
Evan Niu, CFA owns shares of Apple and Facebook. Evan Niu, CFA has the following options: short January 2015 $60 puts on Facebook and long January 2015 $35 puts on Facebook. The Motley Fool recommends Apple, Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Apple, Facebook, Google (A shares), Google (C shares), Microsoft, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.