At Twitter's (NYSE:TWTR) analyst day last November, the company introduced several new ideas for users' timelines. Among them was the "While You Were Away" feature that inserts popular tweets you missed since the last time you logged into your account. Twitter officially rolled out the feature to iOS users on Jan. 21.
The move represents a significant change from the reverse-chronological timeline that provides an up-to-the-second feed of information. The shift puts Twitter timelines on a path to look more like Facebook's (NASDAQ:FB) algorithmically organized News Feed.
In its testing phase, "While You Were Away" was met with decidedly mixed reviews. But the reviews don't matter if the feature accomplishes its goal: engaging a more casual audience on Twitter.
This isn't for power users
Twitter's power users seem most upset that Twitter is messing with their timelines. The good news is that most of them won't ever experience While You Were Away, since it requires users to be away from Twitter for an extended period of time.
Instead, the goal is to present the best content on Twitter to users who log in just a few times a day or a few times a week. The idea is that if a user is constantly seeing great content, he or she is more likely to log in more often.
Facebook is constantly tweaking its algorithm to display the content it believes users most want to see when they log in to Facebook. As a result, Facebook users are highly engaged, with 64% of users signing in daily.
That's not to say a reverse chronological timeline can't work. Facebook's Instagram still organizes content chronologically, and Facebook reported that the average Instagram user spent 21 minutes per day on the platform. Instagram also recently passed Twitter in the number of monthly active users.
But the difference between Instagram and Twitter (and Facebook) is that Instagram encourages users to post high-quality content only. So when people log in, they only see great pictures. Twitter, conversely, encourages users to post anything that comes to mind, so the good stuff can get lost in the mix.
Playing it right down the middle
Twitter is in a difficult position, and the While You Were Away feature is representative of how it's trying to appeal to two markets -- the power users, and the 500 million-plus casual users who may or may not log in. It's unintrusive for power users, while providing a better way to get the most out of Twitter for the casual user.
It's not a complete overhaul of the timeline, so it doesn't move away from Twitter's core real-time network product. At the same time, placing a few select tweets at the top of users' timelines is no guarantee that Twitter will accomplish its goal of engaging a wider audience.
While You Were Away is just one step Twitter is taking to gain a wider, more-engaged audience, which is necessary to drive demand for its advertising products. Since its ad products are mostly based on a bidding system, demand drives average ad prices. While there's still room to increase ad load internationally, ad load in the U.S. is about where Twitter wants it to be.
Twitter ads could sport a very high return on investment for businesses, but unless Twitter expands its audience and its engagement levels, demand will continue to be constrained. Twitter has room to increase its ad load, and that will continue to drive revenue in the near term. That growth will be capped, however, as average ad prices fail to move the needle.
The importance of advertising demand
Facebook is increasing average ad prices at an unbelievable pace as more users spend time on mobile (where it displays fewer ads) and it redesigns its desktop ads. Facebook has plenty of demand to support these shifts, as the company displayed 56% fewer ads in the third quarter but increased its price per ad 274%.
Twitter's advertising business is taking the opposite path to growth. Average ad price declined 17% in the third quarter, while "ad engagements" increased 152%. That model isn't sustainable in the long term. Twitter needs to ensure that its ad prices will increase once it stops increasing its ad loads. A broad-based engaged audience like Facebook's is necessary for that to happen. Whether the While You Were Away feature helps remains to be seen.
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.
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