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Twitter targets emerging markets with Indian R&D center

Twitter Flight
Harriet Taylor | CNBC

Twitter plans to set up a research and design center in the Indian technology hub of Bangalore, its first such facility outside the US, as part of wider moves to accelerate growth in major emerging markets.

The San Francisco-based social network bought Bangalore-based mobile start-up ZipDial for about $40 million last month, and plans to use ZipDial's team as the basis for its new R&D facility, according to people familiar with the matter.

The move comes as Twitter tailors its service for countries such as India and Indonesia, which are set to be its two fastest-growing user markets this year, according to research group eMarketer.

It also coincides with pressure on Dick Costolo, chief executive, to reverse a slowdown in the growth of Twitter's much-watched monthly active user numbers.

Shares in Twitter, which reports fourth-quarter results on Thursday, have dropped by 42 per cent over the past year, partly due to investor concerns that it is not keeping pace with the advance of larger rival Facebook.

Rishi Jaitly, Twitter's head of India, declined to give details of the planned R&D center but said the company's ZipDial deal underlined its focus on developing markets.

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"It does constitute a big vote of confidence from Twitter at the global level in India," he said. "It is a big investment in India and emerging markets, and an engineering center is a big outcome [of the deal]."

Twitter bought ZipDial in the hope that the start-up would help it attract users with basic mobile handsets, or those without mobile data connections.

Before the deal, Twitter and ZipDial developed a technique allowing users to follow a Twitter account by dialing a phone number and then receiving tweets via SMS.

Mr Jaitly said similar approaches would now be developed to provide "a taste" of Twitter to those with limited internet access, tempting them to download its main app.

"The principles behind this deal can definitely be deployed in other countries with large, young mobile-first populations, especially in Indonesia, and especially in Brazil," he said.

Twitter's move to set up an engineering center in Bangalore makes it the latest global technology company to tap India's pool of software developers.

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Xiaomi, the fast-growing Chinese smartphone maker, also said this month that it would set up a center in the city to make software for Indian phone users.

Valerie Wagoner, founder of ZipDial, who joined Twitter following the company's acquisition, said ZipDial's developers would now report to Twitter's main product team in San Francisco.

"We will be the starting point for a much larger R&D center [in Bangalore] in future," she said.

"Twitter wants engineering teams based in emerging markets because we have empathy for users in these markets. This isn't a case of ideas from San Francisco, being built here; we are going to have full control over products."

Twitter's focus on global growth was underlined earlier this month when it announced a series of developer conferences in cities including Bangalore, Shanghai and São Paulo.

Twitter plans to use its international user base to build links with entrepreneurs around the world, while rivals such as Google and Facebook focus their developer conferences on the west coast of the US.

India is set to become Twitter's largest market after the US with a projected 40 million users by 2018, eMarketer data suggest, up from 17 million now.