Twitter (NYSE: TWTR) suspended more than 1 million fake and suspicious accounts in May and June – 70 million in total. That rate continued until July, according to data obtained by The Washington Post and doubles the rate at which Twitter closed accounts in October.
Eliminating accounts by disseminating misinformation and sending spam to the social network is something social media companies have to deal with. Facebook (NASDAQ: FB) eliminated 583 million false profiles in the first quarter. In general, such movements improve the usability of each platform by eliminating bad actors.
For Twitter, however, the sudden increase in the elimination of false accounts during the first half of the year could result in a decrease in their numbers of "active users" when reporting the results of the second quarter to the end of the month. That could ultimately affect the company's finances.
Deleting accounts is generally not a big deal
Suspending and deleting fake, spam and potentially harmful accounts from a social network usually one thing good These bad actors do not add any value to a social network like Twitter or Facebook. In fact, they can decrease the value of a social media platform by increasing the amount of misinformation and offensive content that users see.
It is important to note that many of these accounts are created and managed by bots, computer programs that create and automatically create content: they do not add any value to the advertising business either. These are not the types of accounts that click on the ads.
Then, when Facebook reports that it disposed of more than five hundred million accounts in three months earlier this year, it has minimal impact on its business. The company has been transparent for a long time and believes that between 3% and 4% of active accounts reporting each quarter are false profiles. That number has not changed.
Why it is a big problem for Twitter
Twitter maintains that its number of false accounts is similar to that of Facebook and less than 5% of its active users reported. The recent increase in closures calls that number in question.
Twitter may have had a too lax definition of what constitutes a false account, which reinforces its number of active users and decreases its reported percentage of false accounts. Twitter has become stricter in fake accounts this year, following accusations that the Russians used fake Twitter accounts to influence the 2016 elections.
That may lead to a decrease in the Twitter active accounts reported. In itself, that should not be a big problem; As mentioned, these types of accounts are not seeing or clicking on ads. And since advertisers only pay when a user interacts with an ad, the fake accounts do not generate any income for Twitter.
But a large part of the new Twitter tone for advertisers is an increasingly committed user base. Twitter has promoted a daily base of active users that has grown in double-digit percentages for six consecutive quarters. On Twitter, for the rest, the commitment of users is silent.
It's worth noting that most of Twitter's advertising revenue still comes from its direct sales team. That means that those vanity metrics, like the active daily growth of users, are really important for Twitter. If the increase in account suspensions and deletions causes a slowdown in the daily growth of users, it could ultimately affect Twitter's ability to sell ads to brand advertisers later.
Pay attention to the metrics of Twitter users when reporting the results of their second quarter earnings on July 27. If they are significantly lower than the first quarter, see if management has any additional comments on those numbers.
Adam Levy owns Facebook shares. The Motley Fool owns shares and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.