How Twitter Could Be Impacted By News That 48 Million Users May Be Bots

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TWTR: Twitter logo
TWTR
Twitter

A recent research paper published by professors at the University of Southern California and Indiana University have established that 9-15% of all Twitter (NYSE:TWTR) user accounts exhibit bot-like behavior or are controlled by algorithms. The researchers used 1,150 features to differentiate between human users and bots in the study. The 9-15% figure translates to about 28-48 million accounts, and is much higher than Twitter’s own estimates of 5-8.5%. ((Twitter Bot Research Paper, 2017))

The existence of bots is not necessarily bad news for the company on its own, as such accounts can be used to break news or publish important real-time information. However, many of these accounts are increasingly being used to spread propaganda and abuse, which is a cause for concern. Another important factor is advertiser interest. With user growth slowing to mid-single digits over the last two years, advertiser interest has visibly waned and the presence of such a large number of software-controlled accounts is bound to negatively impact ad spending on the platform going forward. Unsurprisingly, the company’s stock slumped about 4% on the news and is now trading at under $15 per share, down from $25 in October last year.

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Twitter’s struggle to grow its active user base has been the primary investor concern for the past two years, and that is unlikely to change in the near term. However, with the company redirecting its focus from user expansion to profit generation, the key metrics in focus are likely to become user engagement and average revenue per user going forward. twtr-35

Another trend we are watching closely is growth in video. Video consumption has been growing tremendously over the past few quarters on Periscope as well as the Twitter platform with the launch of auto-play videos. It will be interesting to see if this also translates into higher advertising revenue growth going forward.

Have more questions about Twitter? Please refer to our complete analysis for Twitter

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