Bad week for social media as Twitter's stocks plunge

Twitter plunges 13.6% on monthly user drop

Bad earnings news and questions about future prospects decimated shares of Facebook Inc.

The news led to Twitter shares plummeting over 19 per cent in the morning trade.

But some say Twitter's unique position as a real-time network that allows users to follow news and events will eventually pay off. RBC Capital Markets analyst Mark Mahaney said in a note this week that "Twitter operates one of the largest and most influential social networks now in existence", and it is "providing meaningful value to users".

However, Twitter revenue increased by 24% year-over-year, with aggressive advertising gains.

Twitter is nosediving after it said monthly users declined in the second quarter and could fall further over the next few months. Management expects monthly active users to decline sequentially in Q3, falling by mid-single-digit millions.

After expunging about 70 million phony accounts in the months of May and June respectively, Twitter user base witnessed a huge decline, though Twitter chief financial officer Ned Segal said: "most of those (expunged accounts) were excluded from the reported metrics because they were not active on the platform for 30 days or more". "It was a golden child of Wall Street", Ives says.

"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", she said. Lately, though, the social media started cracking down and deactivating accounts or giving less visibility to those that violate its terms of service. "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".

"We are making active decisions to prioritize health initiatives over near-term product improvements that may drive more usage of Twitter as a daily utility", the company said in a shareholder letter.

Twitter plunges 13.6% on monthly user drop
Twitter Stock Plummets 15 Percent After it Purged Fake Accounts

Twitter has warned investors that new investments in security and safety will impact user metrics.

Dorsey noted that Twitter is investing in "new tools to address problem behaviors that distort and distract from the public conversation". That overshadowed strong monthly user growth of 3 per cent compared with the previous year.

The Twitter network claimed in May that their systems determined that more than 9 million of its accounts per week were most likely automated ones or spam.

Twitter has doubled in value over the past year as it became profitable for the first time and investors applauded its live video efforts.

But a lingering concern has been the stalled user base, with Twitter struggling to move beyond its core group of celebrities, journalists and politicians.

It's been a bad week for social media, especially for Twitter and Facebook.

But some say Twitter's unique position as a real-time network that allows users to follow news and events will eventually pay off.

RBC Capital Markets analyst Mark Mahaney said in an upbeat note this week that Twitter is "one of the largest and most influential social networks" and provides "meaningful value to users".

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