Commentary

Developers Might Be Twitter's Life Jacket

Twitter needs to get some wheels spinning, and fast. The same day that Jack Dorsey made his first big appearance as CEO at Twitter’s Flight developer conference, Morgan Stanley downgraded Twitter’s stock to “underweight,” with a price target about 20% lower than the $30 it’s trading at now.

Developers (who figured big in Twitter’s strategy early on, only to be snubbed as management changed their minds) are a key component to making the social giant competitive for both users and investors. “We want to make sure we have a great relationship with our developers — we want to have an open, honest, and a transparent relationship — and that we’re fulfilling and serving every one of your needs,” said Dorsey at the conference.

Twitter announced new APIs, an acquisition, and native mobile video ads, among other new functions to help serve advertisers using their platform.

"Engagement trends are moving against [Twitter's] advertising opportunity, as average time spent per mobile user is falling...and at an accelerating rate," according to Morgan Stanley analysts.

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Two big factors holding Twitter back: the risk of inundating users with ads and reaching an “ad ceiling,” (Morgan Stanley estimates that Twitter's ad load is already 10 times as high as Facebook's when adjusted for time spent) and the fact that Twitter's mobile CPM is already at a 13% premium to Facebook's.

“The competition for users' time and advertisers' mobile and social ad dollars is rising, too, as other platforms — like Instagram, Snapchat, and YouTube — with stronger user and/or engagement growth continue to increase their push for ad dollars," the analysts noted.

The analysts said their vote could be swayed, based on whether or not Twitter can grow monthly active users at a faster rate. But they felt that was unlikely.

Developers could be the key to getting Twitter back on track, but right now the market lacks confidence in the social messenger.

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