To repair reputation, Twitter, Facebook incur investor wrath

Twitter

Twitter

Revenue of $710.5 million, up 24 percent and edging out expectations of $696 million.

The company reported 335 million monthly active users during the second quarter (April to June), an increase of almost 3 percent from a year ago.

But some say Twitter's unique position as a real-time network that allows users to follow news and events will eventually pay off. RBC Capital Markets analyst Mark Mahaney said in a note this week that "Twitter operates one of the largest and most influential social networks now in existence", and it is "providing meaningful value to users". But the company gave a forecast for third-quarter earnings before interest, taxes, depreciation and amortization of as much as $235 million, falling short of analysts' average estimate of $268 million.

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

The average number of spam reports it received through the reporting flow continued to drop - from an average of approximately 25,000 per day in March, to approximately 17,000 per day in May.

Monthly active users fell by one million in the second quarter from the first to 335 million.

"We are confident that this is in the best long-term interest of the platform and will enable long-term growth as we improve the health of the public conversation on Twitter", the company said in a note to shareholders.

Twitter escalated its battle against suspicious accounts late past year in the face of congressional and public pressure following revelations about how Russian Federation used the platform to spread disinformation to shape the 2016 presidential campaign in favour of Republican Donald Trump and against Democrat Hillary Clinton. The social networking giant expects user growth to slow as it battles concerns about privacy in the wake of the Cambridge Analytica crisis in which as many as 87 million people had their personal information improperly obtained by a firm with ties to the Trump campaign. Stalled American user growth and tighter rules on data protection in Europe may dampen revenue growth in two of the company's biggest markets.

Twitter's woes echo the troubles facing fellow Wall Street darling Facebook, which has also been forced to undertake painful changes to its platform amid scandals. The US revenue hit $367 million while global revenue was $344 million. Net income was $100 million, or 13 cents a share, compared with a loss of $117 million, or 16 cents. "Last year's Q2 created an incredible buying opportunity in the stock".

Twitter also saw usage fall after saying it would not subsidise messaging fees for users who accessed its app through text messages. The capital expenditure is put to be between the range of $450 million to $500 million, an increase from a previous estimate of $375 million to $450 million.

Twitter has doubled in value over the past year as it became profitable for the first time and investors applauded its live video efforts.

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