Twitter’s value is a fraction of Facebook’s, but the social media platform more than matched its larger rival’s tumble in U.S. financial markets this week as Chief Executive Officer Jack Dorsey prioritized ensuring “healthy” conversations via tweet over immediate growth.
The San Francisco-based company’s shares fell 21 percent to $24.12 in New York trading on Friday, after Dorsey detailed Twitter’s priorities following slower worldwide gains among active users in the second quarter as well as a small decline in the U.S. The day before, Facebook tumbled 19 percent as executives predicted tighter profit margins and, as at Twitter, emphasized efforts to prevent misuse of the platform in the run-up to midterm congressional elections in November.
Representatives of both firms told the House Judiciary Committee this month that they are working to prevent manipulation of their services by foreign agents trying to influence voters, as intelligence agencies say happened in 2016 when President Trump won an unexpected victory against Democrat Hillary Clinton. Already, the firms have uncovered numerous accounts tied to Russia’s Internet Research Agency, a Kremlin-linked digital propaganda group.
[Also read: Devin Nunes looking at ‘legal remedies’ to take against Twitter for ‘shadow banning’]
“New tools to address behaviors that distort and distract from the public conversation” are paying off at Twitter, where abuse reports linked to conversations have dropped 8 percent, Dorsey said. But those efforts and the deployment of artificial intelligence tools to eliminate accounts linked to automation or spam have forced the company to redirect staff who otherwise would have focused on product development that drove growth.
“We are making active decisions to prioritize health initiatives over near-term product improvements,” Dorsey said in a letter to shareholders. “We’ll continue to invest heavily in making Twitter a healthier service, because it’s the right thing to do, for Twitter as a platform, for the long term health of our business and for society as a whole.”
The tradeoff is reflected in Twitter’s audience: Average active users of 335 million a month worldwide were roughly flat in the second quarter compared with the start of the year, the company said. In the U.S., they dropped 1 percent to 68 million.
Over time, however, preventing abuse of Twitter may have a significant payoff, the CEO said.
“When we do focus on removing some of the burden of people reporting or blocking or muting, we do see positive results in our numbers,” he said on an earnings call. “And it’s still early. We have a lot more work to do, especially in applying machine learning and deep learning and newer models to recognize behavior on the network and shut it down early.”
At Facebook, whose market value of $506 billion overwhelms Twitter’s $25.7 billion, executives are spending money on both growth and safety improvements simultaneously. They cautioned, however, that doing so may shrink profit margins to 35 percent, compared with around 45 percent today.
“We’re investing so much in security that it will significantly impact our profitability,” said Mark Zuckerberg, the founder and chief executive officer. “In light of increased investment in security, we could choose to decrease our investment in new product areas, but we’re not going to, because that wouldn’t be the right way to serve our community and because we run this company for the long term.”
[Opinion: Twitter says it’s not ‘shadow banning’ anyone — it’s just making it harder for you to find them]
