Breakingviews - Twitter purges users and shareholders alike

Twitter shares plunge on news of drop in users

Twitter share price tumbles after it loses 1m users in three months

Twitter's EBITDA (Earnings before interest, taxes, depreciation, and amortization) was $265 million, up from $178 million previous year, but critically, their monthly active users for the quarter were 335 million, down from 336 million in the first quarter.

Twitter shares plunged in early trading as the social-media service reported weak user numbers, a day after Facebook suffered the biggest one-day loss in US market history.

Twitter on Friday reiterated its efforts to "to invest in improving the health of the public conversation" on its platform, making the "long-term health" of its service a priority over short-term metrics - such as user numbers.

Twitter, like bigger rival Facebook has been under pressure from regulators in several countries to weed out hate speech, abusive content and misinformation, better protect user data and boost transparency on political ad spending. It cracked down on fake accounts, purging suspicious accounts from users' follower metrics and removed 143,000 apps last quarter for violating its policies.

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The company's stock has risen 79% this year to $42.94.

The company warned its monthly user number could continue to fall in the "mid-single-digit millions" in the third quarter.

The decline came despite Twitter's simultaneous announcement that its revenue is up a whopping 24 percent this year, and posted a record profit of $100 million. 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.

Average U.S. MAUs were 68 million for Q2, flat with the year-earlier period and down from 69 million in Q1. It was the company's third profit in a row and the third it has ever posted.

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In April, Twitter said it inked more than 30 deals for live and original programming, including with Walt Disney Co (DIS.N) for a Twitter-only version of ESPN's SportsCenter. Stalled American user growth and tighter rules on data protection in Europe may dampen revenue growth in two of the company's biggest markets.

"As a result of our health work, decisions not to renew or move to paid SMS carrier relationships in certain markets, and our decision to allocate resources towards GDPR and health, MAU could decline on a sequential basis in Q3", Twitter said in its shareholder letter. The consensus estimate from analysts surveyed by Thomson Reuters was for EPS of 17 cents, and revenue of $696.2 million.

The user outlook came as Twitter reported higher-than-expected revenue thanks to the FIFA World Cup, video ads and booming global ad revenue.

In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there. In Q2, daily active users increased 11% year-over-year, with double-digit growth in five out of its top 10 global markets.

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