Now would be a good time for Twitter to announce that they are increasing a tweet’s character limit to 10,000, given the plethora of obituaries already being written about the platform as we know it.
Twitter is currently weathering a storm on Wall Street, in the press, and internally.
Mashable’s Seth Fiegerman is calling this Twitter’s “darkest hour,” and Sarah Lacy of PandoDaily says CEO Jack Dorsey is “even more embattled, and the company, even more rudderless.” Fiegerman and Lacy are not the only ones claiming impending doom, and Twitter’s stock prices have continued to drop as a result.
Twitter CEO Defends Beleaguered Twitter Shares on Twitter
Since returning to his old position as CEO just last year, Dorsey has already taken to Twitter several times with hastily prepared statements, attempting to correct false or misleading stories in the media. Though these statements have been reactionary, his strategy is admirable.
Given the media’s coffee-fuelled addiction to Twitter and the pure fact that these statements are coming directly from the company’s CEO, the comments are quickly picked up and thrown into the news cycle. Dorsey’s unconventional choice to tweet, rather than hold a press conference or give an interview, has prevented journalists from distorting or editorializing his message before it reached the consumer.
As a result, Dorsey has authoritatively and proactively restored confidence and controlled the story’s narrative, a demonstration of Twitter’s immense value to any publicly traded company. No longer do these big firms need to issue press releases and then wait to gauge the public’s response. This perk is also one of the key benefits that Twitter could offer investors, pending the implementation of “Beyond 140.”
Can You Beat The Stock Market Using Twitter?
This is a question data scientists, hedge fund managers and social media sentiment analysts have been attempting to answer for around five years. Their findings? Yes and no: it’s complicated, but certainly not impossible.
Investors (or anyone talking about the shares of publicly traded companies for that matter) often drop “cashtags” into their tweets (e.g. $GOOG), which can be monitored as an indicator of the sentiment surrounding a particular company’s shares. As cashtags started to become more prevalent, people started to speculate about Twitter’s function as a social trading floor.
However, this potential wasn’t confirmed until three Cornell University researchers, Johan Bollen, Huina Mao and Xiao-Jun Zeng conducted a study, according to CBS News. By monitoring emotion-related words on Twitter, a technique known as sentiment analysis, they were able to predict the opening and closing of the Dow Jones Industrial Average with 87.8% accuracy.
Encouraged by their accuracy, one hedge fund manager, Paul Hawtin, figured that taking cues from Twitter was a worthy gamble. In 2010, Hawtin launched a $40.5 million absolute return fund through his firm, Derwent Capital. However, the fund was quietly liquidated after only a month and rumours of similar funds wanting to launch at the time soon quieted. Hawtin, though, was undaunted and tried again, this time with DCM Capital.
Hawtin took his second loss.
Both firms were based almost purely on sentiment analysis. Since news almost consistently breaks on Twitter before anywhere else, Hawtin justified that those plugged into the Twittersphere have first access to information that could eventually trickle through to the stock markets. But, not all cashtags that begin trending come to fruition, so making decisions solely on the rumblings within the Twittersphere is a particularly risky endeavor.
Still, Hawtin maintains the system’s viability, and his faith in the system appears to be paying off: his new fund management platform, Cayman Atlantic, opened in 2013 and reported a 9.7% return (S&P reported 1.7%). The analytics, which monitor breaking stories and assess their impact on the fund’s shares, are being considered alongside traditionally utilized trading algorithms, which are then used to alert investors about buying and selling accordingly.
Speaking to HedgeThink, Hawtin said, “For example, if you look at the AP tweet that came out, that’s a really good example of where our systems can monitor, pick up and alert us to tweets that our algorithms think contain information which will affect a share price or an index. We can then make an assessment when we’re alerted, which is pretty much instantaneous from the moment that tweet comes out, and then place a trade on an equity, index or commodity, based on the direction we think the asset will move once that news breaks in the global press.”
You could say that sentimental analysis is trending as more and more companies are beginning to employ this same strategy. According to Dataminr CEO, Ted Bailey, the company is dedicated to sentimental analysis and mines social media for information that it provides to “financial professionals based upon their personalized portfolio of tickers, sectors and macro topics.” Gnip also provides similar information, which is why Twitter, anticipating the importance and potential of sentimental analytics, bought the company in 2014.
Investors, analysts and financial professionals are clearly convinced of Twitter’s value in its current format, something that’s confirmed by the plethora of worldwide academic studies aimed at understanding how social media can inform investing decisions.
The Potential Impact of Twitter #10k and What It Means for Stockholders and Investors
Companies have been created, bought and subject to investment decisions worth millions because of the small pieces of data contained within a tweet’s 140 characters. So what will it mean for investors when Twitter increases the character limit to 10,000?
The biggest perk is for those analysing or trying to predict the movement of a company’s share price: because of the 10,000 characters, tweets will have context.
The media doesn’t always want to report significant and detailed contextual information that could influence share prices, and less biased blogs that are more likely to elaborate on a topic’s complexity are often overlooked. Twitter’s current 140-character limit is too constrained for announcements that influence shareholder’s actions.
Even when Dorsey jumped to defend Twitter in public, he needed to go beyond 140 characters, forcing him to use a screen grab of longer passages of text, an oft-employed loophole to circumvent the character limit. This is one reason Twitter is undertaking this redesign: users’ desire for more room to express their thoughts and feelings — that is, the desire to provide their audience with relevant context — already exists.
Following the expansion, CEOs, board members, activist shareholders, analysts, financial reporters, and anyone else who moves markets will be able to provide much-needed context to the important events that impact their stocks’ value, while also allowing them to grant greater insight into the ups and downs of the market.
This will put everyone, from shareholders to board members, on even footing. Twitter 10k can level the playing field and make it easier for those with a financial interest in a company to be better informed.