Twitter's shares fell by 20% in pre-market trading on Friday in NY, before recovering slightly to be down 16%, as investors were spooked by news that the number of active monthly users fell from 336 million to 335 million over the last three months. That overshadowed strong monthly user growth of 3 percent compared with the previous year.
Twitter said it has been purging offending accounts, which led to many users seeing drops in their official follower counts, but it said a lot of them were inactive already and wouldn't impact monthly user numbers.
The drop echoed that of Facebook on Thursday, when its shares ended down almost 19 percent after the company said spending to improve privacy and slower user growth in big markets would hit margins for years.
The company beat on both adjusted earnings and revenue.
Nonetheless, the newly announced decline in monthly users clearly anxious investors.
A Washington Post report put the total number of suspended accounts in May and June at 70 million. The company purged followers that had been frozen or locked for security reasons, sometimes for long periods of time, but had been included in follower counts. "We believe Twitter's value as a daily utility is enhanced when the conversation on the platform is healthy and people feel safe expressing themselves freely and openly".
Twitter's aggressive moves to clean up the platform has not detracted from its advertising revenue, said the social network's chief financial officer Ned Segal during a conference call.
The company admitted that the Russian activity on its platform "represents a challenge to democratic societies everywhere, and we're committed to continuing to work on this important issue".
Facebook has more than 2.23 billion users while its apps WhatsApp, Instagram and Messenger each have over 1 billion. That company is battling privacy controversies and rising regulation in Europe while also implementing costly new measures to battle disinformation on its platform. Twitter is "improving the health of the system while there's still dramatic DAU growth to come".
Despite reporting a record quarterly profit and forecast-beating sales, its shares fell by 20.5 per cent to $34.12 in NY last night, valuing the company at $25.7 billion. Analysts surveyed in advance by Yahoo Finance expected Twitter to post earnings of $0.17 per share on $696 million in revenue. The social media company also had its third consecutive profitable quarter.
Twitter shares were up 79% year-to-date through Thursday. The company said that daily active users increased 10 percent compared to past year, but - inexcusably - does not disclose the actual figures. "Fake accounts will continue to surface just as quickly as they are deleted".
The huge number of deletions have raised concerns among investors that Twitter - the favorite communications tool of U.S. President Donald Trump - can't attract a more general audience to supplement the politicians, entertainers and journalists who are among its prime users.
Allegations of Russian meddling in the 2016 USA election by spreading misleading or divisive content over social media have made the issue of improving control over accounts and content critical for Twitter.