Twitter shares plunge on news of drop in users

Roman Schwartz
July 28, 2018

That overshadowed a strong monthly user growth of 3 percent compared with the previous year. And though both companies rely on technology to target advertisers' messages at users, Twitter's barely been able to eke out a profit, while Facebook continues to generate billions.

On Friday, Twitter reported a decrease in the number of monthly users on the site.

Analysts had expected to see a monthly average of 338.5 million users, up from 336 million last quarter, but Twitter hit only 335 million. The company's reported revenue of $711 million, up 25% from a year ago.

Twitter's user woes are similar to those of Facebook Inc., which also has been plagued by manipulation, robot accounts and unrest about the growing influence of social media in the culture.

Twitter shares took a pounding on Friday, July 27, amid a warning of a shrinking user base, extending a stock market bloodbath for what had been a sizzling social media sector.

But just like Facebook, Twitter said it's hitting a limit on how many people it can attract to its service, raising hairy questions about what these services can become. They were all attacked by foreign fraudsters during the 2016 USA election looking to disrupt the online discourse and spread fake news. Twitter also earns revenue from licensing data.

The quarter marked the first time overseas revenue contributed the majority of Twitter's ad sales.

"We want people to feel safe freely expressing themselves and have launched new tools to address problem behaviours that distort and distract from the public conversation, " CEO Jack Dorsey said in a prepared statement.

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Wall Street has been closely following Twitter, which owns the micro-blogging service of the same name, because its numbers are an important gauge of its growth prospects. "Last year's Q2 created an incredible buying opportunity in the stock".

In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there.

Twitter reported second-quarter net income of $100.1 million, after reporting a loss in the same period a year earlier. But Chief Financial Office Ned Segal told analysts that the event, which carried into the third quarter, raked in less revenue in its second two weeks. Adjusted earnings were 17 cents a share.

Analysts say Twitter has been on a more sustainable track a year after it explored a sale of the company, although its user base is far below that of the 2.2 billion of Facebook and the billion-plus for Facebook-owned Instagram. Markets outside the United States grew 44% year on year to $US344 million. Trump on Thursday accused Twitter of "shadow banning" prominent conservative voices.

The number of people on Twitter fell during the three months ending in June as it worked to clean up the platform and comply with new privacy regulations.

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. It is also adding jobs, the shareholder letter said.

In April, Twitter said it inked more than 30 deals for live and original programming, including with Walt Disney Co (DIS.N) for a Twitter-only version of ESPN's SportsCenter.

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