Advertisers abandon $TWTR after the company admitted in Q1 it had overstated users for three years and more recent revelations that bots may be understated.
Company reports loss of 8 cents per share vs expected earnings of 14 cents. Company blames Elon for bringing attention to user/bot issues.
By Alexander Muse ·
This morning Twitter released its 2nd quarter results revealing that advertisers are avoiding the platform. Instead of posting earnings of 14 cents per share as it had promised Wall Street, Twitter revealed it had actually lost 8 cents per share. In just three months sales revenue declined by $140 million exacerbating the company’s $270 million loss.
Twitter’s crisis communication team is pushing a narrative that Elon Musk is to blame for the company’s poor performance - and they might be right. But perhaps we should consider another possibility.
Twitter customers (advertisers, etc) were told last quarter that the company had been overstating the number of users it had on its platform for twelve straight quarters. They were forced to update and restate their users in the 10-Q just three days after signing an agreement to sell the company. After three years of filing incorrect numbers to the SEC, Twitter added insult to injury by failing to disclose the issue to Elon Musk - the billionaire would have to wait three days after agreeing to buy the company to find out. Perhaps customers were worried that all was not well with the social media company.
Of course, cutting against this argument is the fact that Twitter has made a habit of overstating their actual user numbers as well as its ability to increase them in the past. You may recall back in 2017 the company announced that it had been overstating users in its SEC filings for three quarters. Just last year the company paid almost a billion dollars to shareholders for misleading them about the company’s ability to attract new users back in 2014.
The biggest difference now is the fact that Elon Musk is bringing attention to the company’s bot problem - attention that might be worrying advertisers. Only time will tell. In fact, the only good news in Twitter Q2 results is the fact that the number of bots on the platform has remained constant (FWIW the number of bots on Twitter is literally the only constant):
“We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the second quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.”
At the end of the day, Twitter pays good money to an Indian outsourcing firm to examine 100 accounts by hand each day and determine how many of them are bots. By the end of each quarter, the number of bots across 9,000 total accounts is less than 5%. It has been this way from the beginning of time and it will be that way until the end of time. Surely this company knows that if they report anything greater than 5% the checks from Twitter would cease…
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