Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Twitter warns fake account purge to keep erasing users, shares drop 19 percent

Stock Markets Jul 27, 2018 12:46PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: People holding mobile phones are silhouetted against a backdrop projected with the Twitter logo
 
META
-0.93%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TWTR
-1.35%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Meredith Mazzilli

NEW YORK (Reuters) - Twitter Inc (N:TWTR) on Friday said it lost 1 million monthly active users from the previous quarter and warned the closely watched figure could keep falling as it deletes more phony accounts, causing the biggest one-day decline in its shares since 2016.

The company said the work it was doing to clean up Twitter by purging automated and spam accounts had some impact on user metrics in the second quarter, and that it was deciding to prioritize tackling suspicious accounts and reducing hate speech and other abusive content over projects that could attract more users.

Allegations of Russian meddling in the 2016 U.S. election by spreading misleading or divisive content over social media have made the issue of improving control over accounts and content critical for Twitter.

Twitter, like bigger rival Facebook (NASDAQ:FB) has been under pressure from regulators in several countries to weed out hate speech, abusive content and misinformation, better protect user data and boost transparency on political ad spending.

The user outlook came as Twitter reported higher-than-expected revenue thanks to the FIFA World Cup, video ads and booming international ad revenue. Twitter also earns revenue from licensing its data.

The quarter marked the first time overseas revenue contributed the majority of Twitter's ad sales.

The World Cup brought in $30 million of revenue in the quarter. But Chief Financial Office Ned Segal told analysts that the event, which carried into the third quarter, raked in less revenue in its second two weeks.

Twitter raised its 2018 capital spending forecast and said adjusted EBITDA margins in the third quarter would be below the second quarter's.

Twitter shares tumbled 19 percent to $34.75 in afternoon trading, marking their biggest one-day drop since Oct. 6, 2016.

The drop echoed that of Facebook on Thursday, when its shares ended down nearly 19 percent after the company said spending to improve privacy and slower user growth in big markets would hit margins for years.

The reaction in Twitter shares to the user outlook may be overblown, some analysts said.

Twitter executives answered questions on the earnings call by saying the steps to improve daily user and advertiser experience would be a long-term boost for the company, and that there had been no revenue hit.

Revenue of $711 million rose 24 percent from last year and exceeded the average estimate of $696 million.

Chief Executive Jack Dorsey said in a statement that daily users grew 11 percent compared to a year ago, showing that addressing "problem behaviors" was turning the service into a daily utility. The company does not disclose daily users.

Segal said the efforts to improve accounts along with other factors had a negative hit to monthly active users of 3 million in the quarter, which compares with the 1 million net decline, but added that efforts to improve quality of the accounts would take an even bigger bite out of third-quarter monthly users.

Twitter said in a blog post in early July that weeding out accounts would not hurt metrics because the accounts would mostly be inactive.

FEWER MONTHLY ACTIVE USERS

Monthly active users fell by 1 million in the second quarter from the first to 335 million. Analysts expected a gain of 1 million users, and the results could harden concerns Twitter lacks a clear strategy to fix platform problems and grow usage and revenue together.

"We are making active decisions to prioritize health initiatives over near-term product improvements that may drive more usage of Twitter as a daily utility," the company said in a shareholder letter. Twitter refers to platform “health” when describing the spam and other issues.

Twitter said the decline in the third quarter would be in the mid-single-digit millions, suggesting a sequential decline to around 330 million users. Analysts had expected 340 million monthly active users in the third quarter, according to Thomson Reuters I/B/E/S.

Twitter’s relations with advertisers have been strained by concerns about phony accounts bought by users to boost their following.

Profit was $100 million, with a $42 million boost due to a tax benefit. Non-GAAP earnings of 17 cents per share were in-line with estimates.

"Investors are overreacting to (monthly active user) trends," BTIG analyst Richard Greenfield said about the share fall. "This is an identical overreaction that we saw in Q2 last year. Last year's Q2 created an incredible buying opportunity in the stock."

Twitter said it lost some users due to the introduction of the General Data Protection Regulation in Europe in May but did not note any revenue impact.

Twitter also saw usage fall after saying it would not subsidize messaging fees for users who accessed its app through text messages.

The new capital expenditures forecast is for between $450 million and $500 million, up from $375 million to $450 million, as Twitter expands and upgrades the computer infrastructure underlying its service. The company again flagged its push to increase headcount this year.

Costs related to licensing video and automated analysis of user data increased overall expenses 10 percent compared with a year ago.

Twitter has said increased video programming, including news shows and live sports, and investing in technology that automatically surfaces interesting content with limited user intervention should make the service appealing to first-timers.

Twitter warns fake account purge to keep erasing users, shares drop 19 percent
 

Related Articles

Marketmind: Oil and jobs
Marketmind: Oil and jobs By Reuters - Oct 06, 2022

A look at the day ahead in U.S. and global markets from Mike Dolan World markets calmed a bit on Wednesday after a tumultuous couple of weeks - but a focus on energy prices and...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Joel Gehrke
Joel Gehrke Jul 27, 2018 11:36AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Twitter and the media present this project to "suppress hate speech" as a matter of corporate responsibility. What they're doing is asking you if you're a bot, and then extracting personal information so they can expose or threaten you in the future. Not a friendly service. Not a good long term vehicle for the candor that anonymity allows. So: If you really want to know the floor on @Twitter subscribers, just purge ALL the anonymous accounts---most of which are disfavored political opinions about issues like third world immigration or women's issues or race relations---and whoever are left are the people who are safe. Twitter obviously intends to bully everyone else into the street. And when they get that done, that's where you buy---assuming you have no qualms about supporting a huge, worldwide corporate enemy of freedom of expression.
Michael Mantion
Michael Mantion Jul 27, 2018 11:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Fixing platform mean suppressing pro conservative posts before the mid term
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email