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Twitter's stock slides after report of fake-account purge

Twitter's stock slides after report of fake-account purge
Since the fall, Twitter has gotten much more serious about cracking down on its longstanding problem of fake accounts. (Leon Neal / AFP/Getty Images)

Twitter Inc.'s stock slid Monday after a news report said the company suspended more than 70 million accounts in May and June — a cleanup of the platform that may affect user growth.

The Washington Post article, published Friday, said that the suspensions could have some impact on the company's tally of monthly active users, a key growth metric that is closely monitored by Wall Street investors.

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Twitter shares dropped nearly 10% on Monday before recovering somewhat; they closed at $44.14, down 5.4%. The decline comes on the heels of a positive run for the company. Overall its shares are up 145% over the last 12 months, and it posted its first profit ever in February. The number of monthly active users, called MAU, jumped to 336 million in April, up from 330 million in the previous quarter.

On Monday, Twitter's chief financial officer, Ned Segal, said in a tweet that most of the suspended accounts had not been active in the previous 30 days and thus would not be counted in the MAU metric. However, the aggressive removal of unwanted accounts could result in a rare decline in the number of monthly users when the company reports its quarterly results this month, a person familiar with the situation said last week.

Although falling user growth is a risk for Twitter, so are fake accounts that stoke disinformation and manipulation. Since the fall, Twitter has gotten much more serious about cracking down on its longstanding problem of fake accounts. The decision to devote more resources to the issue followed a protracted battle within the company, and is a response to increased scrutiny in the wake of Russian meddling in the 2016 election and of news reports about the severity of the bot problem. Twitter has also gained new technical capabilities that have enabled it to improve its detection of bots.

The company estimates that roughly 5% of its active users are fake or involved in spam, but outside researchers have said the number is much higher.

Twitter disclosed some details about the crackdown, which it refers to as information quality efforts, in April. Segal said the effort was already affecting monthly user counts and would be expected to do so in the future.

"The broader health initiatives that is removing spamming and suspicious accounts from Twitter continues to be something that will impact MAU," Segal said on the company's earnings call. "We're always going to do the right thing to make sure that the service is great for those that should be on it."

Shareholders were not the only ones who appeared to take note of Twitter's latest policing efforts. On Saturday, President Trump tweeted about the news and used it as an opportunity to attack the news media. "Twitter is getting rid of fake accounts at a record pace. Will that include the Failing New York Times and propaganda machine for Amazon, the Washington Post, who constantly quote anonymous sources that, in my opinion, don't exist - They will both be out of business in 7 years!" he tweeted.

4:55 p.m.: This article was updated with Twitter shares’ movement and closing price.

This article was originally published at 12:30 p.m.

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