Digits Onboarding Users Love
Look, Ma! No passwords! Source: Twitter.

Passwords are pretty terrible at doing their job -- letting you in and keeping others out. They're either too hard to remember or too easy to hack -- and often both. Twitter (NYSE:TWTR) thinks it can help.

Last week, the company announced Digits, which replaces the typical email/password login with a simpler process: Enter your phone number, receive an SMS with a confirmation code, and enter the code. The code expires as soon as it's used, so you don't have to worry that anyone will get hold of it.

It's pretty clever, and considering most smartphones have nice little drop-down notifications with the first parts of text messages, it doesn't even really require users to flip between their messaging app and the app they want to log into.

Twitter is offering the service for free, meaning it's picking up the tab for those SMSes. But why?

Expanding into emerging markets
A funny thing happens when a smartphone is someone's first computer ever. That person doesn't sign up for email. The phone does the job of email by making voice calls and sending text messages. That's why we've seen messaging apps such as WhatsApp have so much success around the world with a sign-up process that requires only a phone number.

As Twitter expands internationally, it's looking to capitalize on the three-quarters of smartphone purchasers outside the U.S. and Europe. That means making it easy for them to sign up for its service, even before they sign up for an email address (if they ever do).

Making it easier to sign up for an account on Twitter could help solve one of the company's biggest problems. On the second-quarter conference call, CEO Dick Costolo noted that Twitter gets two to three times the number of unique visitors as it has active registered users. Over the past several quarters, Twitter has worked on strategies to reduce friction in the onboarding process, but Digits may be its best effort yet.

It's not just for Twitter, though
Twitter announced Digits at its inaugural developers conference because it's open for all developers to put in their apps. Twitter says it takes only a couple lines of code, and Twitter handles the rest -- including the SMS fees.

It's something of an olive branch from Twitter, after it threw a wrench in a lot of apps when it changed its developer policy in 2012. That year it revoked access to the API from big-name developers such as Tumblr and Instagram, locking out new users from finding connections they previously made on Twitter. Many other developers were affected as well, including popular third-party Twitter clients. Suffice it to say developers were displeased.

Twitter is hoping to win back the trust of developers with Digits as well as several other tools in a set it's calling Fabric. The tool set includes features from Crashlytics, Twitter's free crash reporting service, and MoPub, its mobile ad platform. It also includes access to Twitter's content through some reworked APIs.

Increasing the number of developers using its tools such as Digits could help Twitter sell premium tools to developers or help developers fill ad inventory with MoPub. Providing a better solution than a company such as Facebook (NASDAQ:FB), however, is becoming increasingly difficult.

Facebook is doing a good job of staying one step ahead. App developers widely use its social login (far more than Twitter), and it just opened its ad network to developers while introducing a demand-side platform for ad purchasers to target users better on mobile. Digits might be more attractive for users, but developers may prefer the data they can get from a social login -- although Facebook is cutting back on the data it shares.

Mobile first, developers first
In his introduction of the new developer tools, Costolo said Twitter "wanted to approach this not from the perspective of what would be best for Twitter, but what would help [developers] be most productive." That wording is funny, because the CEO's job is to do what's best for the company. What Costolo means is he's aligning the interests of Twitter with the interests of developers.

Since 2012, Twitter has bought MoPub and Crashlytics. Now it wants to get its ads into as many apps as it can and increase adoption of Crashlytics. Repairing the damage it did in 2012 will go a long way toward achieving those goals.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.