Twitter purges users and shareholders alike

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Management expects monthly active users to decline sequentially in Q3, falling by mid-single-digit millions. However, in the second quarter, revenue rose 42% to $13.2 billion.

Brian Wieser at Pivotal Research Group said efforts to curb fake accounts "should be viewed positively because these efforts improve Twitter's position with regulators and with advertisers, who see the user base as higher quality when purges occur". It's also possible that Facebook's disappointing quarter, from an investor expectations perspective, compounded the negative reaction to Twitter's earnings.

Allegations of Russian meddling in the 2016 US election by spreading misleading or divisive content over social media have made the issue of improving control over accounts and content critical for Twitter.

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 average number of spam reports it received through the reporting flow continued to drop - from an average of approximately 25,000 per day in March, to approximately 17,000 per day in May.

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".

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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.

Twitter escalated its battle against suspicious accounts late previous year in the face of congressional and public pressure following revelations about how Russian Federation used the platform to spread disinformation to shape the 2016 presidential campaign in favour of Republican Donald Trump and against Democrat Hillary Clinton.

Ad revenue for the quarter was $601 million, representing growth of 23 percent over past year. Long criticized for allowing bad behavior to run rampant on its platform, Twitter has begun to crack down, banning accounts that violate its terms and making others less visible. The US revenue hit $367 million while global revenue was $344 million. The company's non-GAAP net income for the quarter was $134 million, up from $56 million in the year-ago period.

"They're cleaning up a lot of MAUs that are not good or real", said Richard Greenfield, an analyst at BTIG, referring to monthly active users.

Twitter said it lost some users due to the introduction of the General Data Protection Regulation in Europe in May but did not note any revenue impact. The company again flagged its push to increase headcount this year.

Yet the market had more than doubled Twitter's value over the past year to $32 billion, and the valuation to 50 times estimated earnings.

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