Social Media

Why Twitter’s stock soared 7.5% on analyst day

A trader works on the floor of the New York Stock Exchange.
Adam Jeffery | CNBC

Twitter's analyst day was a moment of truth for CEO Dick Costolo, facing growing pressure about slowing user growth and lack of a clear vision. Well he delivered that vision, and a number of changes to the product, and investors liked what they heard. The stock soared 7.45 percent after the presentation.

Why? Costolo's vision for Twitter to connect people to their world and to the world was clear—and he explained a range of ways they'll make the company better, and how they should make money doing so.

Some highlights of the presentation that explain the stock's move:

Twitter will be easier for new users: It will "remove friction." The idea is to make Twitter instantly accessible. Instead of having to gradually add people you want to follow, the company will deliver an instant timeline, so new users can dive back in.

Twitter's moment of truth

The company plans to add significant functionality to private messaging: The company is calling it key to long-term growth. It sounds like Twitter wants to take the fact that people text each other all the time and bring that texting communication inside its system. Plus, it's making it easier to share Tweets privately, rather than having to send an email when you want to share a tweet with someone.

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Twitter's working to launch a range of new services and apps: For developers, that means new tools like its 'Fabric' developer toolkit. For users, that means totally stand-alone apps like 'Vine.' (Here Twitter seems to be taking a page of Mark Zuckerberg's strategy to build out a portfolio of apps around Facebook). The more tools it gives developers, the more distribution its ads and Tweets will get. The more apps it offers, the more opportunity to generate ad revenue.

Expect a range of improvements to the product: Twitter will make it easier to watch video on Twitter. Users will be able to record, edit and share video within Twitter. It's investing in improving search and new location-specific experiences. Plus, Twitter's working on some curation—so when you come back to the app after being away, instead of seeing just the latest tweets, it'll feature the most important tweets from "While you're away." Why? If every time you open Twitter you see something really great, rather than just the latest, you'll be more likely to share it.

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CFO Anthony Noto is bullish on revenue growth: Noto admitted that his plans are "aspirational," but he laid out a couple of scenarios that would enable the company to scale to the kind of revenue that the largest Internet companies have.