BCN-03,04,05 Twitter shares plunge in black week for social media

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Twitter shares plunge in black week for social media

WASHINGTON, July 28, 2018 (BSS/AFP) – Twitter shares took a pounding on
Friday after it reported a decline in its user base, extending a stock market
bloodbath for what had been a sizzling social media sector.

Shares in Twitter tumbled 20.5 percent to close at $34.12 despite a record
profit for the short messaging service, as financial markets focused on the
new realities for social media firms moving to curb abusive behavior and
boost privacy.

The woes for Twitter came a day after Facebook lost an unprecedented $120
billion in market value following its earnings report that sent investors
into a panic over cooling growth for the social network star.

Twitter said it posted a best-ever profit of $100 million in the second
quarter, following a loss of $116 million a year earlier. Revenue rose 24
percent to $711 million.

But the San Francisco-based firm said its base of monthly active users
fell by one million from the past quarter to 335 million in the period amid a
purge of fake and abusive accounts and a crackdown on toxic “bots.”

Twitter said it also expected user numbers to drop in the current quarter
by a figure in the “mid-single-digit millions.”

The fall in users is a result of “prioritizing the health of the platform,
and, to a lesser extent, GDPR,” Twitter said, referring to Europe’s General
Data Protection Regulations that limit how internet firms can handle user
data.

– Wall Street ‘off guard’ –

Analyst Daniel Ives at GBH Insights said markets have abruptly begun to
consider “a new risk factor that has been introduced” — how security and
privacy affects the bottom line.

“It got the Street off guard in terms of the magnitude of the effect it
had on earnings,” Ives said.

Jennifer Grygiel, a Syracuse University professor who specializes in
social media, said the market is coming to grips with a tougher picture for
the sector as companies seek to curb manipulation and abusive conduct while
coping with new regulations on privacy and data protection.

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“What you’re seeing is a market correction as the industry adjusts for
increased operational expenses as governance and ethical business
expectations have been raised globally,” she said.

“Social media is not going anywhere. What has changed is that the public
and regulators are no longer buying into (the) rhetoric and myths that social
media is too big to moderate.”

Chief executive Jack Dorsey said the past quarter’s results reflect
investments “in the long-term health” of Twitter, noting efforts to weed out
abusive and inappropriate behavior.

“We’ll continue to invest heavily in making Twitter a healthier place
because that’s the right thing to do,” Dorsey told analysts on a conference
call.

– New tools to fight abuse –

Dorsey noted that Twitter is investing in “new tools to address problem
behaviors that distort and distract from the public conversation.”

In recent weeks, Twitter has stepped up efforts to weed out accounts that
promote violence or hate speech, and some reports suggested the move could
lower the user base by millions.

Earlier this week, Twitter said it had removed more than 143,000 apps from
its service since April in a fresh crackdown on “malicious” activity from
automated accounts.

Twitter shares had more than doubled over the past year as it showed signs
of sustaining profitability after years of losses.

But a lingering concern has been the stalled user base, with Twitter
struggling to move beyond its core group of celebrities, journalists and
politicians.

Both Twitter and Facebook moved to crack down on bots and fake accounts
after learning of efforts to manipulate the social platforms during the 2016
US presidential election.

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Dorsey told analysts that Twitter had a “solid quarter” and suggested that
daily usage was a better measure of its future growth.

Twitter said daily active users rose 11 percent from a year ago, without
giving a specific figure.

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.

But some say Twitter’s unique position as a real-time network that allows
users to follow news and events will eventually pay off.

Brian Wieser at Pivotal Research Group said efforts to curb fake accounts
“should be viewed positively because these efforts improve Twitter’s position
with regulators and with advertisers, who see the user base as higher quality
when purges occur.”

RBC Capital Markets analyst Mark Mahaney said in an upbeat note this week
that Twitter is “one of the largest and most influential social networks” and
provides “meaningful value to users.”

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