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Twitter (TWTR) Expands Content Recommendations With New Tests

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Twitter recently announced that it is expanding how it recommends posts from accounts that users do not follow in an attempt to keep users active in the app for longer. These recommendations — which can be shown on the Home timeline, the Notifications tab, Topic Landing Pages, Explore, the Spaces Tab and more — are displayed based on various in-app actions by users.

Among the new designs, Twitter has been testing the placement of Related Tweets below conversations on a tweet detail page. Additionally, Twitter is experimenting with an "X" tool that users may click on to remove recommended tweets they do not like from their timelines.

The tests are an effort by social media companies to push what they call unconnected content, or posts from accounts users do not follow. TikTok is fueling a whole new content shift by focusing on AI-based recommendations as opposed to the social graph. Every platform has been tapping this opportunity to incorporate the same, highlighting the best posts that they have to offer to increase the time spent.

Increasing Attempts to Curb Abuse on Platform

As part of the expansion, Twitter is also building tools for users to control and provide feedback on that content. Some users have complained about related tweets exposing them to irrelevant content and creating confusion over which tweets were part of a conversation and which were suggested by the algorithm.

The company has been removing accounts that are abusive, spammy, fake or malicious. Although this initiative is expected to foster healthy conversation over the long term, it can hurt user base growth at least in the near term. Along with other social media companies, Twitter is also facing increased scrutiny over its data handling practices and privacy issues.

Shares of Twitter, currently carrying a Zacks Rank #4 (Sell), have declined 4.7% in the year-to-date period compared with the Zacks Internet – Software industry’s decline of 51.1%.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Intensifying competition for ad dollars and user engagement from the likes of Snap (SNAP - Free Report) , Meta Platforms (META - Free Report) , Alphabet’s (GOOGL - Free Report) Google and TikTok is another persistent headwind. Snap is benefiting from improving user engagement, particularly in the 13 to 34-year-old demography, which is expanding its advertiser base. SNAP is also giving competition to META in the metaverse space. It collaborated with Vogue to feature a virtual try-on experience of select pieces from Balenciaga, Dior and Gucci, which will be available for snapchatters globally.

META is pumping resources into developing AI to address solutions for megatrends like a hybrid work environment, which will drive its user base across various platforms like Meta Portal Go. Investments in AI are also expected to draw higher revenues from Meta’s ad business.

In its race to target TV ad dollars, Alphabet allowed third-party (Nielsen and comScore) tagging of YouTube videos to determine the effectiveness of ads on YouTube versus ads shown on TV. The Google Preferred program pulls out the top 5% of the most engaging content on YouTube for advertisers. Alphabet has also promised to advertise this content itself in order to boost traffic. Google Preferred is attracting its users to spend more time on the platform. Mobile revenues on YouTube continue to grow and TrueView (where advertisers pay only when consumers see the ad) also continues to do well.

In the second quarter, YouTube’s advertising revenues grew 4.8% year over year to $7.3 billion, while Network advertising revenues increased 8.7% to $8.3 billion. Total Google advertising revenues grew 11.6% year over year to $56.3 billion and accounted for 80.8% of the total revenues.

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