

Last September Twitter Inc. took what looked like a giant step when it doubled the character limit on its news and social networking site from 140 to 280.
At the time, the media sentiment on the move was that all hell would break loose on the social media site, further encouraging abuse or simply driving away people with extremely short attention spans. Twitter said the change at first did in fact encourage people to write longer posts, but it turns out there was no need to panic.
Indeed, Chief Executive Jack Dorsey said during a fourth-quarter earnings call with investors that the only thing that had really changed was more engagement on the platform.
“One of the things we were watching for is to see if the if the average tweet size would go up as a result, and it has not,” Dorsey said. “We’re seeing less abandonment of tweets. But we’re also seeing a lot more engagement. We’re also seeing more retweets, and we’re seeing a lot more mentions. And we’re also seeing people get more followers and return more often.”
It was a promising sign that was underscored by Twitter’s financials, reported early Thursday. The company posted its first quarterly profit, earning $91 million. Revenue gains were much more modest, up 2 percent in the quarter, to $732 million, from a year ago. But that beat analysts’ forecast of $686.4 million.
The result was that shares jumped as much as 30 percent, the most since 2013, though they later cooled to close up 12 percent, to $30.18 a share. It’s thought the growth is a result of improvements to the app, leading to higher engagement, as well as the addition of video which is bringing in more advertising sales.
“Overall, the results represented ongoing progress which was consistent with our longer-term expectations for Twitter as a durable, if niche-y (but highly differentiated), platform for digital advertising which should eventually be able to approach industry-level growth rates,” Brian Wieser, an analyst with Pivotal Research Group, wrote in a note to clients today. But he said the runup in the stock was way out of proportion because the results were “hardly a game-changer,” and as a result, he moved from a hold to a sell rating on the shares.
“We don’t think Twitter’s appeal will break out of its niche status any time soon,” he said. “This severely limits its revenue potential, as Facebook and Google will continue to capture the bulk of the growth in spending for digital advertising.”
For its part, Twitter in its shareholder letter said click-through rates on ads rose for all major ad types. “Machine learning initiatives are having an impact by steadily refining our targeting and ad-matching capabilities over time,” the company noted.
The only downside was user growth, which remained flat at 330 million monthly active users. In the U.S., the number of users actually fell from 69 million to 68 million. But with people seemingly engaging more on the platform and profits following, Twitter’s bird finally has a good reason to sing.
With reporting from Robert Hof
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