Twitter (TWTR - Free Report) suspended more than 70 million accounts in the last two months, per Washington Post, in its attempt to combat criticisms and improve the quality of conversations.
Lately, social media giants have been closely watched by U.S. lawmakers and international regulators as they are struggling to prevent spread of malicious information, hateful conduct, and unauthentic accounts.
In recent times Twitter has taken several measures to improve safety and reliability by coming up with a verification process for opening accounts on the platform. Additionally, it is also conducting audits to ensure authenticity of every account created on the platform.
However, as a consequence of this change, follower count may drop for users. But in the long run, we believe the company’s efforts to tackle misconduct will eventually help it attract more authentic users and advertisers, thereby boosting its top line.
Twitter, Inc. Revenue (TTM)
Twitter’s Security Measures to Enhance User Engagement
Twitter has been tightening security features ever since it, along with Facebook (FB - Free Report) and Alphabet’s (GOOGL - Free Report) Google division, faced severe criticism for spreading fake news that allegedly influenced the 2016 U.S. Presidential elections results.
The company can now combat spam, abuse and bullying by leveraging customized machine learning models with the buyout of Symte. This will help it address the most obvious and pressing areas of concern for the social media platform in recent times.
We therefore believe the company’s new efforts to fight against bots and trolls will help it build trust, repair brand image and thereby improve user engagement.
Currently, Twitter has 336 Monthly Average Users (MAUs). In second-quarter fiscal 2018, this is expected to up nearly 3%, per Reuters.
Improving Engagement to Drive Advertising Revenues
Twitter earned most of its revenues from advertisers using its Promoted Products (promoted tweets, accounts and trends). The company’s advertising sales accounted for roughly 86% of total revenues ($665 million in the last reported quarter).
The company’s expanding database helps marketers to target audiences on the basis of interest and gender, geography, keyword, television conversation and device.
Additionally, its strategy to diversify from a mere micro blogging site to a destination for video and live streaming seems to be working in its favor.
Twitter recently announced reorganization of its business structure by folding the live video unit into its content partnership team that will make it “easier to put together future deals.”
Moreover, Twitter’s focus on live streaming has helped the company turn around its fortunes in the last two quarters. Notably, for 2018, the company has more than 30 new programs in the field of news, sports, entertainment and gaming through its collaborations with NBCUniversal, Disney’s ESPN, Viacom and VICE Media.
Ad engagements increased 69% year over year in the last reported 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.
We believe all these efforts will enable the company to maintain its strong foothold in the social media industry in spite of competition from the likes of Facebook and Snap (SNAP - Free Report) owned Snapchat among others.
Currently, Twitter has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
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