Amid phony accounts reports, Twitter to prioritize platform over user growth

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Twitter Inc on Friday reported fewer monthly active users than analysts expected and warned that the closely-watched figure could keep falling as it deletes phony accounts, sending shares sharply lower in early trading.

The company said the work it was doing to clean up Twitter by purging automated and spam accounts had some impact on its user metrics in the second quarter, and that it would prioritize improving suspicious accounts and reducing hate speech and other abusive content over projects that could attract more users.

Twitter, like bigger rival Facebook Inc, has been under pressure from regulators in several countries to weed out hate speech, abusive content and misinformation, better protect user data and boost transparency on political ad spending.

Monthly active users fell by 1 million in the second quarter from the first to 335 million. Analysts had expected a gain of 1 million users, and the results could harden concerns that Twitter lacks a clear strategy to grapple with various platform problems and grow usage and revenue together.

Twitter said the decline in the third quarter would be in the mid-single-digit millions, suggesting a sequential decline to around 330 million users. Analysts, on average, had expected 340 million monthly active users in the third quarter, according to Thomson Reuters I/B/E/S.

Twitter shares fell 15 percent in pre-market trading. “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 accompanying the results.

The user outlook came as Twitter reported higher-than-expected revenue thanks to the FIFA World Cup driving ad demand, strength in video ads and booming international ad revenue. Twitter also earns revenue from licensing data.

The quarter marked the first time overseas revenue contributed the majority of Twitter's total advertising sales. Chief Executive Jack Dorsey said in a statement that daily users grew 11 percent compared to a year ago, saying this showed that addressing “problem behaviors” was turning the service into a daily utility.

The company did not reveal the number of daily users. Twitter had said earlier in July that deleting phony accounts would not have much impact on monthly users, since the purge focused on inactive accounts. Twitter’s relations with advertisers have been strained by concerns about phony accounts bought by users to boost their following.

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