Twitter is making more money with fewer users

Twitter is making more money with fewer users, helping offset investors' concerns about ongoing efforts to p...

Posted: Oct 25, 2018 2:34 PM
Updated: Oct 25, 2018 2:34 PM

Twitter is making more money with fewer users, helping offset investors' concerns about ongoing efforts to purge bad actors and clean up the platform.

Twitter on Thursday posted stronger than expected sales and profits for the third quarter despite a continued decline in the number of monthly active users.

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The social network had 326 million monthly active users for the three months ending in September, a significant drop from 335 million in the previous quarter and 330 million in the same period a year earlier. In the United States, the number of monthly active users fell to 67 million from 68 million in the prior quarter.

Twitter chalked up the user decline in part to its efforts to comply with a new European data privacy law as well as "decisions we have made to prioritize the health of the platform." Worse still: the company expects monthly users to fall again in the upcoming quarter.

But the number of people who use the platform every day continues to grow. Daily active users increased 9% from a year ago, though Twitter does not break out the actual number of these users.

"This quarter's strong results prove we can prioritize the long-term health of Twitter while growing the number of people who participate in public conversation," Jack Dorsey, Twitter's CEO and cofounder, said in a statement.

On a conference call with analysts Thursday, Dorsey highlighted Twitter's traction reducing "suspicious" account signups by 20% from the prior quarter. He credited "new techniques" to better identify spammy and malicious accounts.

Although Dorsey admitted these efforts to make Twitter less toxic may have "short-term implications" for user numbers, he stressed that he expects the company's health initiatives will be key to the "long-term growth of the platform."

That pitch appears to be working with advertisers. Twitter's sales hit $758 million for the quarter, a nearly 30% increase from a year prior, on the strength of its ad sales business. Twitter also continued its streak of profitable quarters, posting a net income of $106 million for the three month period.

The stock jumped more than 10% in pre-market trading Thursday following the earnings report.

In recent months, Twitter has focused on safeguarding the service amid scrutiny of its role in spreading fake news and election meddling as well as the broader data privacy backlash hitting the tech industry. It cracked down on fake accounts, purging suspicious accounts from users' follower metrics and removed 143,000 apps between April and June for violating its policies.

Like Facebook, Twitter is working to comply with the General Data Protection Regulation, which took effect in Europe earlier this year. The company said in April that monthly active user growth could be "negatively impacted" by the new rules.

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