Is Twitter’s fix fewer twits?
Jack Dorsey says he is focused on “improving the health of the public conversation on Twitter”. His shareholders may not be so enthusiastic about that. On Friday the microblogging site reported that its monthly user tally fell from 336-million to 335-million over the second quarter. Dorsey, co-founder and CEO, said the site was making serious efforts to weed out fake, abusive and “spammy” accounts. Twitter shares fell nearly a fifth.
It has been a rough earnings season for social media and subscriber-based tech stars such as Netflix, Facebook and now Twitter. Each has a distinct approach to profitability. But the companies’ investor bases are most animated by hopes of sustained high earnings one day.
This month Wall Street found out that — due to saturation, fatigue or scandal — the limits of easy user gains are approaching faster than expected. Twitter’s scale has been a disappointment for anyone who expected it to be the next Facebook. But in the past year its shares jumped more than 160%. Meeting more realistic expectations, it has figured out ways to appeal to advertisers. On its preferred measure of adjusted profit margin, it hit 37%. It believes it can get into the 40s, which would match Facebook.
The newest tech clique is Maga — Microsoft, Apple, Google and Amazon — whose stock market fortunes are not strictly tied to a level of users or subscribers. Amazon’s shares traded up on Friday even as its revenue growth of 39% slightly disappointed. An operating profit margin of slightly less than 6% was buoyant enough for investors.
Twitter’s decision to impose more strident checks means user numbers will shrink. That should improve the experience for remaining Tweeters, even if investors are still figuring out what this is going to mean commercially. London, July 30