Twitter reports drop in active users as it purges fake accounts — spooking investors despite strong financials

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Twitter reported record profits and exceeded expectations for revenue in the second quarter, but a drop in user count due to the social network’s efforts to remove bots and fake accounts and a miss on earnings per share sent its stock into a tailspin Friday.

Twitter stock dropped as much as 18 percent in morning training on news that it lost 1 million monthly active users in the quarter, a figure that now stands at 335 million. Twitter said new behavioral controls meant to create more civil conversations and its efforts to purge the platform of bots are part of the reason for the drop, as are new privacy laws.

“We are proud of the tangible improvements people are seeing on Twitter,” the company wrote in a letter to investors. “We believe Twitter’s value as a daily utility is enhanced when the conversation on the platform is healthy and people feel safe expressing themselves freely and openly.”

Twitter’s situation echoes that of fellow social network Facebook, which has seen its stock drop 18 percent following a rough quarterly report earlier this week. Like Twitter, Facebook is investing in improving the experience for users — in Facebook’s case by upping privacy controls — a move that eats into metrics like user growth and profitability.

Twitter, after years of losses has posted profits in each of the last three quarters. The social network reported profits of $100 million in the second quarter, a huge turn around from a year ago when the company lost $116 million.

Twitter posted earnings per share of $0.13 on revenue of $711 million, a 24 percent rise over the prior year. Analysts surveyed in advance by Yahoo Finance expected Twitter to post earnings of $0.17 per share on $696 million in revenue.