Published: Mon, July 30, 2018
Markets | By Jeffery Armstrong

Twitter shares plunge in black week for social media

Twitter shares plunge in black week for social media

Twitter shares were under pressure in early trading in the U.S. after the company posted financial results for the second quarter, echoing the fate that befell Facebook the day before.

Two of the biggest social media platforms lost almost one-fifth of their market value after reporting disappointing user growth. 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. Analysts say Twitter has been on a more sustainable track a year after it explored a sale of the company, but its user base is far below that of the 2.2 billion of Facebook and the billion-plus for Facebook-owned Instagram.

Facebook, which has long defied gravity with consistently robust sales growth, warned shareholders on Wednesday that those days may be waning. The company does not disclose daily users.

Twitter plunges 13.6% on monthly user drop

Facebook continues to grapple with big existential questions, ranging from its users' privacy to tech addiction to how it deals with fake news and misinformation, hate speech and extremism on its service. Both companies are hitting a ceiling for user growth.

Twitter had 335 million monthly users in the second quarter, below the 339 million Wall Street was expecting, and down slightly from 336 million in the first quarter.

Twitter's revenue has reached a record high even though monthly user numbers dropped by a million.

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Twitter's stock closed down 21 per cent Friday, though it has still more than doubled in the past year. Twitter refers to platform "health" when describing the spam and other issues.

Chief executive Jack Dorsey said the results reflect investments "in the long-term health" of Twitter, noting efforts to weed out violence and inappropriate behavior.

As of May 2018, said Twitter, its systems identified and challenged more than 9 million potentially spammy or automated accounts per week, up from 6.4 million in December 2017. Twitter estimates a total of about a whopping three million accounts to have been affected by the above-mentioned reasons.

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The service's plethora of product updates and push into live video streaming have made Twitter less cumbersome to use, driving advertising revenue and profit in the second quarter. Rich Greenfield, an analyst at BTIG, tweeted this morning that daily active user count is a more reliable indicator of Twitter's revenue potential than monthly active user count, citing a research note BTIG published a year ago. Facebook lost $119 billion in value on Thursday. In the second quarter, Twitter's daily active user count rose by 11 percent from a year ago. The social media company also had its third consecutive profitable quarter.

Profit was $100 million, with a $42 million boost due to a tax benefit. Analysts had expected a gain of 1 million users, and the results could harden concerns that Twitter lacks a clear strategy to grapple with various platform problems and grow usage and revenue together.

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