Twitter (TWTR - Free Report) unveiled new measures to uphold user security by addressing the issue of abusive “trolls” on the platform. The social media provider revealed that instead of waiting for people to report such tweets, it will use behavioral signals to identify and limit their visibility.
Twitter believes this will enable the company to improve the “health of the conversation” and boost user experience on the platform.
We note that Twitter has been tightening security measures ever since the company along with Facebook (FB - Free Report) and Alphabet’s (GOOGL - Free Report) Google faced severe criticism for spreading fake news that allegedly influenced the 2016 U.S. Presidential elections results.
The security issues of these companies grabbed the attention of the government regulators again after Facebook’s Cambridge Analytica data breach incident came into light in March.
However, despite the controversy, Twitter maintains an edge over its competitors. Shares of Twitter have returned 36.4% year to date, substantially outperforming the 7.8% rally of the industry it belongs to. In comparison, Facebook has gained 4.4% while Snapchat parent Snap (SNAP - Free Report) lost 27.1%.
Should Facebook Worry?
Facebook has been under fire from all quarters ever since data misuse allegations surfaced against the company in mid-March. The company is leaving no stone unturned to regain its lost image. The number of initiatives taken by the company to make its social media platform free of misconducts will help restore trustworthiness.
Twitter is in no way behind Facebook in creating a safer environment and repairing brand image. Last month, the company joined Facebook to increase political ad transparency. Twitter announced its support for Honest Ads Act in a bid to make its platform more transparent and viable.
In October 2017, Twitter declared that it will provide users with more detailed information regarding advertisements posted on the platform, more specifically the political and issue-based campaigns. The company also recently joined forces with Facebook and Google to ban cryptocurrency ads from the platform.
Per Twitter’s lately released Transparency Report, more than 1.2 million accounts have been suspended since August 2015. Moreover, since Jul 1, 2017 to Dec 31, 2017, the company permanently banned a total of 274,460 accounts linked with terrorism.
Per Facebook's latest estimates, fake accounts represent approximately 3-4% of its user base. The social media giant took down 583 million of such accounts in the first quarter.
Although Twitter’s monthly user base of 336 million is nearly one-sixth of that of Facebook, its growing popularity among world leaders, journalists, politicians and intellectuals is what sets it apart.
Moreover, Twitter’s focus on live streaming has helped the company turn around its fortunes in the last two quarters. Notably, ad engagements increased 69% year over year in the March quarter. Management noted that video ads continue to be the key driver and therefore it is expanding video-oriented content to attract more advertising revenues.
Notably, for 2018, the company has more than 30 new programs in the field of news, sports, entertainment and gaming by collaborating with NBCUniversal, Disney or ESPN, Viacom and VICE Media.
Improving Competitive Prowess
We believe the slate of new programs is opening avenues for Twitter to compete with Facebook. We note that Facebook’s News Feed changes in order to limit public content, news and video, resulted in a decrease in time spent on the platform in the fourth quarter. Although management refrained from providing any specifics in the last reported quarter, a decline in time spent on passive video consumption was noted.
Further, Facebook’s continuous rise in ad pricing is also a concern. During the first quarter, the social media giant’s average price per ad increased 39%, while ad impressions increased only 8%.
Nonetheless, we believe Twitter’s proactive stance in eliminating malpractices on its platform coupled with the addition of engaging features will boost its brand value, eventually attracting advertisers and driving the top line. These initiatives will help it withstand stiff competition in the digital ad market currently dominated by Google and Facebook.
Twitter currently sports a Zacks Rank #1 (Strong Buy) while Facebook & Google parent Alphabet have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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