Twitter Shares Plunge After Company Loses 1 Million Active Users
28 July, 2018, 20:17 | Author: Salvatore Jensen
More than $6bn (£4.6bn) has been wiped off the market value of Twitter after the social media service reported a drop of 1 million users after it finally took action to delete fake and offensive accounts.
Twitter's user numbers overshadowed the company's impressive earnings. Twitter said in a blog post it had identified an issue where some accounts were not auto-suggested in search even when people were searching by specific name. Worldwide ad revenue grew 40%, to $308 million - the first time non-U.S. sales represented the majority of total ad revenue. Twitter isn't doing great either, as the company's stock dropped 21% following the quarterly earnings report. It doesn't disclose DAUs but said those remain well below 50% of monthly active users.
Twitter and Facebook are trying to reduce the amount of abuse and hate speech on their platforms, but that's affecting their growth, one of the things investors value the most.
While monthly visitors declined, Twitter highlighted daily active users as the best measure of success. Twitter has been criticized for allowing users to use hateful, violent and racist language, and, along with Facebook, has been a tool for Russian influence, as NPR has reported. Analysts had expected 340 million monthly active users in the third quarter, according to Thomson Reuters I/B/E/S.
Looking at the rest of the numbers, Twitter posted a Q2 net income of $100 million, or 13 cents per share - a record high for the company.
Twitter's stock dropped more than Facebook's, but Twitter has a significantly lower market cap than Facebook, so the impact was far less extreme.
Macquarie Research analysts last week downgraded Twitter shares to "neutral" despite raising their price target for the stock to $42 from $36.
Revenue: $US711 million, up 24% year on year and beating expectations of $US696 million.
Revenue of $711 million, mostly from advertising and up 24 percent from past year, exceeded the average estimate of $696 million among analyst research aggregated by Thomson Reuters.
In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there.
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. Markets outside the U.S. grew 44% year on year to $344 million.
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. In Q2, daily active users increased 11% year-over-year, with double-digit growth in five out of its top 10 global markets.
"We're making progress and will continue to invest heavily in making Twitter a healthier service", said CEO Jack Dorsey, in an earnings call with Wall Street analysts.
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