Twitter shares took a pounding on Friday after it reported a decline in its user base, extending a stock market bloodbath for what had been a sizzling social media sector.
The plunge in shares came after Twitter announced a purge of its users that saw the suspension of over 70 million users suspected of using the platform for hate speech and other suspected abuse.
Shares in Twitter tumbled 20.5 percent to close at $34.12 despite a record profit for the short messaging service, as financial markets focused on the new realities for social media firms moving to curb abusive behavior and boost privacy.
Twitter’s loses comes a day after Facebook made stock market history as it lost an unprecedented $120 billion in market value following its earnings report that sent investors into a panic over cooling growth for the social network.
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Twitter reported that it posted a profit of $100 million in the second quarter, after a loss of $116 million a year earlier as revenue rose about 24 percent to $711 million.
It however also admitted that its base of monthly active users fell by one million from the past quarter to 335 million in the period after a purge of suspected fake and abusive accounts as well as a crackdown on toxic “bots.” The tech giant also admitted it expected user numbers to drop in the current quarter by a figure in the “mid-single-digit millions.”
Twitter said this fall in users is a result of “prioritizing the health of the platform, and, to a lesser extent, GDPR,” Twitter said, referring to Europe’s General Data Protection Regulations that limit how internet firms can handle user data.
A social media professional, Jennifer Grygiel, said the market is coming to grips with a tougher picture for the sector as companies seek to curb manipulation and abusive conduct amidst trying to cope with new regulations on privacy and data protection.
According to her, “What you’re seeing is a market correction as the industry adjusts for increased operational expenses as governance and ethical business expectations have been raised globally. Social media is not going anywhere. What has changed is that the public and regulators are no longer buying into (the) rhetoric and myths that social media is too big to moderate.”
Twitter’s CEO Jack Dorsey tried to allay the fear of investors by explaining that the past quarter’s results reflect investments “in the long-term health” of Twitter as it makes efforts to weed out abusive and inappropriate behavior.
“We’ll continue to invest heavily in making Twitter a healthier place because that’s the right thing to do,” he said.
In recent weeks, Twitter has stepped up efforts to weed out accounts that promote violence or hate speech, and some reports suggested the move could lower the user base by millions as 70 million accounts have been suspended or restricted lately.
Twitter announced that it had removed more than 143,000 apps from its service since April in a fresh crackdown on “malicious” activity from automated accounts. This move also comes in the wake of the supposed Russian attempt to manipulate the 2016 US presidential election.