Twitter is likely preparing to purge up to 10 million users from the app because they post to much porn, according to SunTrust Robinson Humphrey analyst Robert Peck and his team. Peck made the prediction in a note to investors ahead of Twitter’s April 28 Q1 earnings call.
A purge of that size would weigh heavily on Twitter’s stock, which generally gets punished by investors whenever it does not meet expectations for user growth. As Twitter grew users by only 14 million sequentially in Q1 2015, a purge of 10 million would crush Twitter’s numbers.
Peck is concerned because “basic searches” on Twitter produce results riddled with pornography, and he has seen some big name brands’ ads appear next to that adult content. Nielsen recently halted a Twitter ad campaign for this reason.
Peck believes Twitter is aware of the problem and will employ technology to root out and disable the accounts of people tweeting graphic material in violation of Twitter’s “terms of service” (TOS). “Bears” (people who think TWTR will decline in price) believe this could lead to a loss of users and the people who enjoy following them. Peck writes (emphasis in the original):
Bearish investors point out that one can still see users that that are violating Twitter’s ToS and we would expect these users will need to be purged at some point — estimates put this users range ~10m users.
… Twitter’s technology should hopefully be able to identify these users, but it may take some time. One can perform basic searches to see the issue.
… Bears believe that there must come a time when Twitter’s technology can purge these users. While a one-time purge of these users would impact MAUs [monthly active users], Bears also point out that, in addition, followers of these users could also churn off which could weigh on MAU growth (sometimes the non-compliant user has thousands of users). We want to underscore that we think Twitter takes ToS violations seriously, and is likely diligently
working on this issue (or would address immediately if currently unaware). Further, we suspect this is a short to mid term issue, as longer term we presume the issue can be solved.
Peck noted after the call, in a separate note, that CEO Dick Costolo offered “no change or update on the issue of potential ‘not safe for work’ content or users and monetisation. The company stated that it deploys filters in an attempt to keep up with a very dynamic platform and those filters are not perfect.”
Disclosure: The author owns Twitter stock.
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