To fix reputation, Twitter, Facebook incur investor wrath

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Twitter's second-quarter net income hit $100.1 million, after a loss a year ago during the same period.

Announcing Q2 results, the company reported slightly better than expected revenues of $711 million and mostly in-line earnings of $0.17 per share.

As captured in a letter from Twitter to its shareholders:"As a result of our health work, decisions not to renew or move to paid SMS carrier relationships in certain markets, and our decision to allocate resources towards GDPR and health, MAU could decline on a sequential basis in Q3, based on our current level of visibility, we expect the decline to be mid-single-digit millions of MAU".

The number of users on Twitter dropped during the quarter that ended in June as the microblogging platform attempted to clean out fake accounts and comply with Europe's new regulations about users' privacy. "It was a golden child of Wall Street", Ives says.

Jennifer Grygiel, a Syracuse University professor who specializes in social media, said the market is coming to grips with a tougher picture for the sector as companies seek to curb manipulation and abusive conduct while coping 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".

Twitter on Friday reiterated its efforts to "to invest in improving the health of the public conversation" on its platform, making the "long-term health" of its service a priority over short-term metrics such as user numbers.

Twitter and Facebook are trying to reduce the amount of abuse and hate speech on their platforms, but that's affecting their growth, one of the things investors value the most.

"We want people to feel safe freely expressing themselves and have launched new tools to address problem behaviours that distort and distract from the public conversation", CEO Jack Dorsey said in a prepared statement. Allegations of Russian meddling within the 2016 US election by spreading deceptive or divisive content material over social media have made the difficulty of bettering management over accounts and content material vital for Twitter.

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Earlier this week, Twitter said it had removed more than 143,000 apps from its service since April in a fresh crackdown on "malicious" activity from automated accounts.

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

Twitter's dip in user numbers renewed old concerns that its audience will be forever stalled around the 300 million mark.

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

Dorsey told analysts that Twitter had a "solid quarter" and suggested that daily usage was a better measure of its future growth.

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

Segal said the efforts to improve accounts along with other factors had a negative hit to monthly active users of 3 million in the quarter, which compares with the 1 million net decline, but added that efforts to improve quality of the accounts would take an even bigger bite out of third-quarter monthly users.

Before its earnings were released Friday, Twitter executives had disputed the notion that cracking down on bogus accounts could hurt revenues, arguing that many of those suspicious accounts were already excluded from its user tallies.

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