Many Twitter (NYSE:TWTR) users find the service endearing for its lack of algorithms used to organize tweets from the people they follow. Tweets just show up in reverse chronological order letting users know exactly what is going on the moment they log in.
But algorithms have started creeping into Twitter. Search results are filtered based on "top" tweets. More recently, the company introduced "While You Were Away," which places certain machine-selected tweets at the top of users' feeds if they haven't logged in in over 12 hours. But that's just the start, according to CFO Anthony Noto.
Where, when, and how
Speaking at the Morgan Stanley Technology, Media, and Telecom conference earlier this month, Noto said:
We have the best aggregation of real-time content. And the opportunity we have is to organize that in a better way -- in a unique way -- and then bring the best of Twitter to where people want it, when they want it, and how they want it. And we've only scratched the surface.
He gave the examples of a "Twitter Daily Edition," providing a recap of what happened in a user's world today, and a "Best Of" curation for big events, similar to how other media outlets hand-curate lists after the events.
Twitter is in a unique position to leverage its content because, as Noto points out, the company doesn't have to ask permission from its users to use their tweets. It can use geotagging to determine where its users are -- for example, the Superbowl -- and curate tweets automatically based on location.
Using algorithms could give Twitter a leg up in trying to compete with Snapchat's popular hand-curated Our Story feature, which stitches together photos and videos from big events. Last December, I wrote how Snapchat is capable of taking mobile advertising share from Twitter through its Our Story feature. Sometimes the best defense -- or only defense -- is a good offense, and Twitter has focused on adding features like in-app video capture to compete with Snapchat. The next step is to increase curation whether by hand or by alogrithm.
The advertising opportunity for curated content is huge
The reason Noto sees curation as such a big opportunity is because it provides a couple of key benefits for Twitter.
First, curated content will increase engagement. When Twitter provided curated timelines during the World Cup last year, it didn't drive material growth in monthly active users, but Twitter found its users were more engaged. Providing similar experiences, as it did with the NFL last fall and is doing with the Cricket World Cup this year, should help drive more engagement.
Secondly, curated content is more lucrative to advertise against than the unorganized stream of tweets in a regular timeline. Last September, Noto told analysts at the Citi Global Technology conference that he sees a huge opportunity advertising in curated feeds like the World Cup. He likened the experience to advertising a sports product on ESPN versus ABC.
More curated content means more opportunities to offer better targeted advertising, which will have a positive impact on Twitter's ad prices. Moreover, curated content is also an opportunity for Twitter to monetize logged-out and syndicated viewers (those who view tweets embedded on different sites), which represent a huge market. Since Twitter doesn't need as much information on users to advertise against curated content -- due to the interest-based nature of curation -- it can easily monetize logged-out viewers.
Noto sees the opportunity to monetize its logged-out visitors at about half the rate of its logged-in users. And management claims to have nearly twice as many logged-out visitors as active users. So, logged-out visitors essentially have the potential to double Twitter's revenue. On top of that, Twitter has already started to monetize its syndicated content through deals like the one with Flipboard.
In order to reach that level of monetization, however, it will have to drive logged-out engagement by implementing more algorithmically curated timelines. At the same time, it could drive more ad impressions through higher engagement of its logged-in users and syndication to its content partners.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Twitter. The Motley Fool owns shares of Apple 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.