Despite the fact that Twitter lost 9 million users in the past quarter, Wall Street’s reaction to the company’s earnings report was surprisingly upbeat. Twitter’s share price soared by more than 15 percent on Thursday, after reporting better-than-expected revenue growth and its fourth consecutive quarterly profit.
Twitter posted a net profit of $789 million ($106 million excluding a $683 tax credit) on revenue of $758 million for the quarter. The company’s monthly active users averaged 326 million, down from 335 million in Q2. The decline can at least partly be attributed to the company’s crackdown on fake/troll accounts, which is probably why shareholders didn’t react as negatively as they usually would have.
In fact, Twitter’s purge against illegitimate accounts and the subsequent decline in active users are seen as positives by many experts. By banning troll accounts Twitter is making itself more attractive to advertisers who wouldn’t want their products/services promoted on a platform filled with hate speech, spam and false information. “We have a more engaged audience and we are delivering a better return on investment for advertisers,” Chief Financial Officer Ned Segal said in an interview, suggesting that a highly engaged, smaller user base might be better for advertisers than a slightly bigger user base that is littered with inactive or fake accounts.
The following chart shows that Twitter’s revenue growth has started to disconnect from its user growth, a trend that shareholders will approve of, considering that user growth hasn’t been Twitter's strongest suit historically.
Twitter Loses Users, Reignites Revenue Growth
