Twitter user numbers — and shares — fall as it continues deleting phoney accounts
San Francisco — On Friday, Twitter reported fewer monthly active users than analysts expected, and warned that the closely watched figure could keep falling as it deletes phoney accounts, sending shares sharply lower in early trading.
The company said the work it was doing to clean up Twitter by purging automated and spam accounts had some effect on its user metrics in the second quarter, and that it would prioritise work to improve suspicious accounts and reduce hate speech and other abusive content over projects that could attract more users.
Monthly active users fell by one-million in the second quarter from the first to 335-million. Analysts had expected a gain of one-million users, and the results could harden concerns that Twitter lacks a clear strategy to grapple with various platform problems and grow usage and revenue together.
Twitter said the decline in the third quarter would be in the mid-single-digit millions, suggesting a sequential decline to about 330-million users. Analysts, on average, had expected 340-million monthly active users in the third quarter, according to Thomson Reuters I/B/E/S.
Twitter shares fell 16% in pre-market trading.
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 advertising spending.
"We are making active decisions to prioritise 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 accompanying the results.
CEO Jack Dorsey said in a statement that daily users grew 11% compared to a year ago, saying this showed that addressing "problem behaviour" was turning the service into a daily utility.
The company did not disclose the number of daily users.
Twitter had said earlier in July that deleting phoney accounts would not have much of an effect on monthly users, since the purge focused on inactive accounts, a key metric for investors and advertisers. Twitter’s relations with advertisers have been strained by concerns about phoney accounts bought by users to boost their following.
Revenue of $711m, mostly from advertising and up 24% from 2017, exceeded the average estimate of $696m among analyst research aggregated by Thomson Reuters.
Twitter said it benefited from two weeks of the Fifa World Cup in the second quarter, with ads tied to the soccer tournament generating $30m in revenue.
Profit was $100m, with a $42m boost due to a tax accounting move. Twitter turned its first profit since inception in the fourth quarter of 2017 and has been profitable ever since, but warned last quarter that revenue growth would slow in 2018 and costs would rise.
Earnings excluding items were 17c per share, in-line with analyst estimates. 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 said it lost some users due to the introduction of the General Data Protection Regulation in Europe in May but it did not note any revenue effect.
Twitter also saw usage fall after saying it would not subsidize users who accessed its application through text messages without paying messaging fees to wireless carriers.
The company increased its capital expenditures forecast for the year to between $450m and $500m, from $375m to $450m, as it expands and upgrades the computer infrastructure underlying its service.
Costs related to licensing video and powering automated analysis of user data increased overall expenses 10% to $631m in the second quarter compared with a year ago.