Twitter's stock plunges 21% after reporting drop in user numbers

A view of a logo for the company Twitter on the floor of the New York Stock Exchange.
A view of a logo for the company Twitter on the floor of the New York Stock Exchange.PHOTO: EPA-EFE

NEW YORK (WASHINGTON POST) - Twitter lost one million monthly active users in the second quarter, the company said in its earnings report on Friday (July 27), signalling that it's paying a price for implementing an aggressive new campaign to suspend fake and suspicious accounts.

The earnings report was Twitter's first since The Washington Post reported three weeks ago that the company was suspending accounts at a rate of roughly a million a day after implementing new tools for detecting accounts that might be involved in disinformation or other activity, such as spam, not permitted on the platform.

Twitter had 335 million average monthly active users in the second quarter, down from 336 million the previous quarter.

The company said that its monthly user numbers would continue to decline in the third quarter, expecting the drop to be in the "single-digit millions." Twitter's stock closed down 21 per cent on Friday, though it has still more than doubled in the last year.

Company executives had acknowledged their new tactics against suspicious accounts but said the impact on active users was likely to be limited because most of the suspended accounts were either not active or newly created.

Friday's report offered the most definitive evidence yet that the company's efforts are having a measurable impact on Twitter's ability to attract and maintain active users - the key metric in the company's valuation by Wall Street. The one million loss came from users in the United States, the company said.

Twitter has warned investors that new investments in security and safety will impact user metrics. This month many high-profile Twitter users, including President Trump and former president Barack Obama, saw a significant drop in their follower counts. The company purged followers that had been frozen or locked for security reasons, sometimes for long periods of time, but had been included in follower counts.

Chief executive Jack Dorsey said that Twitter prioritises the long-term health of the platform over short-term metrics.

"We believe that Twitter's value as a daily service is enhanced when the conversation on the platform is healthier and people feel safe freely expressing themselves."

Twitter's aggressive moves to clean up the platform has not detracted from its advertising revenue, said the social network's chief financial officer Ned Segal during a conference call.

"Advertisers embrace the work we are doing," he said, adding that "they recognise that a healthier Twitter, as opposed to a disclosed metric, is what's going to deliver a great result for them."

 
 
 

The news comes after Facebook lost more than US$100 billion in value following a disappointing earnings report on Wednesday. That company is battling privacy controversies and rising regulation in Europe while also implementing costly new measures to battle disinformation on its platform.

The combined impact of two leading tech companies stumbling in the same week could make investors wary of an industry whose growth has been key to the economy and stock market for years. Google parent company Alphabet, however, is having a strong week after reported earnings on Monday.

Twitter beat expectations for revenue, reporting US$711 million in sales. That's up 24 per cent year-over-year, the company said. Financial analysts had estimated the revenue to come in at US$698 million. The social media company also had its third consecutive profitable quarter.

Social media researchers for years had complained about the prevalence of bots - automated accounts managed by people seeking to shape online discourse - on Twitter, accusing the company of playing down the problem and not doing enough to curtail their influence.

Twitter escalated its battle against suspicious accounts late last year in the face of congressional and public pressure following revelations about how Russia used the platform to spread disinformation to shape the 2016 presidential campaign in favour of Republican Donald Trump and against Democrat Hillary Clinton.

The company implemented new tools, including one called Operation Megaphone, that involved quietly buying fake accounts and seeking to detect connections among them.

Using its new tactics, the social media company suspended more than a million accounts a day in May and June and is slated to have kept that pace through July. The company has more than doubled its rate of suspensions since last year.

"It's becoming obvious that they have done something about the presence of fake accounts on their platform," said Jonathan Albright, a social media researcher for the Tow Centre for Digital Journalism at Columbia University. "

The problem was bad, and it did go on for way too long."

The campaign has drawn some complaints from users, especially conservatives who have accused Twitter of singling them out in an effort to limit their free expression. The company has said its efforts to battle fake and suspicious accounts has been nonpartisan.

The earnings call did not touch on a new looming issue for the company, which President Donald Trump tweeted about Thursday. Trump accused the social media company of trying to silence prominent conservatives on the platform.

The president appeared to seize on a Vice report that said that the accounts of some conservatives did not show up in auto-populated search suggestions when people typed in their names.

Twitter said in a blog post on Thursday that it does not "shadow ban" users, and that the issue of auto-populated search results had impacted hundreds of thousands of accounts, but did not target users by political affiliation.

The issue, Twitter said, probably stemmed from its systems detecting coordinated behaviour by communities seeking to boost each other's presence on the platform, which caused the names not to appear in the auto-suggested search. Twitter said the issue has been resolved.