Twitter shares fall 20% after reporting user decline

DETROIT MI- Twitter Chairman and Square CEO Jack Dorsey moderates a panel discussion with Detroit entrepreneurs at Techonomy Detroit at Wayne State University

Twitter said it posted a best-ever profit of $100 million in the second quarter, following a loss of $116 million a year earlier. Income of $711 million rose 24 % from final 12 months and exceeded the common estimate of $696 million.

Twitter had 335 million monthly users in the second quarter, below the 339 million Wall Street was expecting, and down slightly from 336 million in the first quarter.

Twitter said it also expected user numbers to drop in the current quarter by a figure in the "mid-single-digit millions".

After expunging about 70 million phony accounts in the months of May and June respectively, Twitter user base witnessed a huge decline, though Twitter chief financial officer Ned Segal said: "most of those (expunged accounts) were excluded from the reported metrics because they were not active on the platform for 30 days or more".

Analyst Daniel Ives at GBH Insights said markets have abruptly begun to consider "a new risk factor that has been introduced" - how security and privacy affects the bottom line.

A social media professional, Jennifer Grygiel, said the market is coming to grips with a tougher picture for the sector as companies seek to curb manipulation and abusive conduct amidst trying to cope with new regulations on privacy and data protection.

"What you're seeing is a market correction as the industry adjusts for increased operational expenses as governance and ethical business expectations have been raised globally", she said.

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"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. "What has changed is that the public and regulators are no longer buying into (the) rhetoric and myths that social media is too big to moderate".

Having moved to paid SMS carrier relationships in certain markets where users have better access to Twitter or Twitter Lite, making changes to improve the "health" of the platform and some impact from GDPR, a set of regulations in the European Union meant to protect consumer data, was what Twitter anchors on as reasons for the setback. Investors still value Facebook at $503 billion. "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". Monthly active users have been lingering around 330 million for a year now, and the shareholders weren't pleased with the lack of progress, as evident from Twitter's stock price which is currently down 15.28%, according to Mashable.

Twitter's dip in user numbers renewed old concerns that its audience will be forever stalled around the 300 million mark.

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. "As a reminder, DAU [daily active users] growth continues to be the best measure of our success in driving the use of Twitter as a daily utility", the statement said. Analysts say Twitter has been on a more sustainable track a year after it explored a sale of the company, but its user base is far below that of the 2.2 billion of Facebook and the billion-plus for Facebook-owned Instagram.

But some say Twitter's unique position as a real-time network that allows users to follow news and events will eventually pay off. It said during April that growth in monthly user could be impacted negatively by the new regulations.

Before its earnings were released Friday, Twitter executives had disputed the notion that cracking down on bogus accounts could hurt revenues, arguing that many of those suspicious accounts were already excluded from its user tallies.

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