Twitter's tougher stance on users is hurting its growth

The number of people actively using Twitter fell in the second quarter of 2018, the company confirmed today. Monthly active users slipped to 335 million in the three-month period, down from 334 million. Curiously, the one million drop-off came from America, rather than any of the company's international markets. For Twitter, that's a serious concern, though not an unexpected one. The company has been under pressure to tackle bots and extremist accounts that are breaking community guidelines. Chief executive Jack Dorsey has promised to do better, with moderators reportedly suspending ov er 70 million accounts over the last two months.

Twitter seems to be cleaning up its platform, albeit slowly. That tough, but necessary work should improve the service for everyone, earning goodwill from longtime users and creating a healthier business in the process. The short-term drop in active accounts, though, won't be appreciated by many investors. Following the release of its second quarter earnings, Twitter shares plunged more than 15 percent in premarket trading. Not good.

For Dorsey and his team, it's a tricky balancing act. If the company can eradicate toxic accounts, it should encourage users to stay on the platform and log in more frequently. That ray of hope shines through in the company's steady growth in daily active users -- Twitter doesn't disclose the actual figure, but confirmed that it's risen by 11 percent year-over-year. That's a fraction higher than last quarter and roughly in line with every quarter in 2017. The company will, undoubtedly, like that growth to be higher, but it's a positive number in an otherwise lackluster report.

Twitter might be losing users, but it's making money. The company made $711 million in revenue during the quarter, up from $665 million before. That led to $100 million in profit -- a huge jump from the $61 million reported in its last financial earnings. It's the third consecutive quarter that Twitter has turned a profit, and its third ever, meaning the company has finally found a seemingly stable business model. "We're maintaining profitability while we make investments in the business," Ned Segal, Twitter's CFO said, "achieving strong revenue growth and introducing product updates that make Twitter both healthier and easier to use."

In a press release, Dorsey confirmed that the drop in monthly active users was a direct consequence of the company's clean-up operation. "Our second quarter results reflect the work we're doing to ensure more people get value from Twitter every day," he said. "We want people to feel safe freely expressing themselves and have launched new tools to address problem behaviors that distort and distract from the public conversation."

This is a developing story. More to follow...

Source: Twitter Q2 2018



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