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Twitter Share Plunge As Company Reports Reduced Active Users Despite Great Revenues

Twitter Share Plunge As Company Reports Reduced Active Users Despite Great Revenues
Twitter Inc warned that the number of monthly active users would fall in the coming days because the company would be deleting fake accounts. The company also announced that this number had been lower than what analysts expected for the second quarter. This resulted in the share so the company shares falling sharply.
The company said that its user metrics had been hurt by the cleaning up process undertaken by Twitter by removal of automated and spam accounts in the second quarter and that it would continue to focus on the enhancement of the reduction of suspicious accounts and hate speech and other forms of abusive content.
Similar to Facebook, Twitter has been under intense pressure in many countries to reduce hate speech, abusive content and misinformation and use better policies for protection of user data and enhance transparency on spending on political ads.
The number of monthly active users dropped by 1 million in the second quarter from the 335 million in the first quarter. Markets had estimated that e Twitter would make a gain of 1 million users. Burt they now believe that the second quarter results would solidify concerns there is a lack of a clear strategy to tackle the various problems of the platform of Twitter and its growth in users and revenues.
The company has suggested mid-single-digit millions decline in the number of monthly active users in the third quarter which turn out to be about 330 million users. Expectations of about 340 million monthly active users in the third quarter are being placed by analysts.
“We are making active decisions to prioritize 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.
The dampening user data of the company over shadowed the higher-than-expected revenue reported by the company for the second quarter driven by increased ad demands during the FIFA World Cup, strength in video ads and the bloated global ad revenue environment. Licensing of data is also another revenue source of Twitter.
The second was also important because it was the first time that overseas revenue accounted for a large part of the company’s revenues.
Compared to the same quarter a year ago, the average daily users grew by 11 per cent, said Chief Executive Jack Dorsey. He added that this exhibited that the company was addressing “problem behaviors” which was helping the application to be turned into a form of daily utility.
The company did not reveal the number of daily users.
The company beat market estimates of for revenues of $696 million with a figure of $711 million where most of it was accounted for by advertising and saw a 24 per cent increase compared to the same period last year. The ads during the FIFA World Cup generated revenues of $30 million.
The company reported profits of $100 million aided by a $42 million boost because of tax accounting move.
Earnings excluding items were 17 cents per share, in-line with analyst estimates.
“Investors are overreacting to (monthly active user) trends,” BTIG analyst Richard Greenfield said about the share fall. “This is an identical overreaction that we saw in Q2 last year. Last year’s Q2 created an incredible buying opportunity in the stock.”

Christopher J. Mitchell

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