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

NEW YORK– On Friday, Twitter Inc. announced that it has lost around 1 million monthly active users from the previous quarter, 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”.

On Thursday, the drop echoed that of Facebook, 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.

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.

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

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

BTIG analyst, Richard Greenfield said about the share fall “Investors are overreacting to trends. This is an identical overreaction that we saw in Q2 last year. Last year’s Q2 created an incredible buying opportunity in the stock”.

 

by Sawan Kumar on July 30, 2018

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