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Why Are Twitter’s Costs and Expenses Rising?

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Twitter’s rising expenses

Twitter’s (TWTR) costs and expenses rose 12.8% YoY (year-over-year) to $546.8 million in the second quarter. The company is making efforts to fight the fake news menace and has suspended many suspicious accounts for violating its anti-spam rules.

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Adjusted EBITDA

Due to rising expenses, Twitter is predicting its adjusted EBITDA growth to remain sluggish. In the second quarter, it reported adjusted EBITDA of $264.8 million, which was 48.8% higher YoY and 8.5% higher sequentially. The adjusted margin in the quarter was 37%.

However, the company predicts weak adjusted EBITDA for the third quarter. It’s forecasting adjusted EBITDA of $215 million–$235 million for the quarter. 

Efforts to keep the platform safe

Twitter has been making efforts to build back user confidence in the platform since it was revealed that social media platforms such as Twitter and Facebook were reportedly misused to distort the results of the 2016 US presidential election.

Twitter has been suspending as many as a million accounts per day. It closed ~70 million accounts in May and June. It has also been blocking the creation of 50,000 suspected spam accounts each day. It has reportedly doubled the rate of illegitimate account suspensions since last October.

Twitter’s user growth is being hurt by rising cases of abusive content, cybercrime, and trolling. Twitter’s MAU (monthly active users) was 335 million at the end of the quarter, down from 336 million in the first quarter and below analysts’ estimate of 338.5 million. Facebook’s (FB) daily active users missed analysts’ expectations in the second quarter, which pulled down the stock more than 20% in after-hours trading on July 25.

Facebook’s monthly users were more than 2.2 billion at the end of the second quarter. Snap’s (SNAP) Snapchat and Microsoft’s (MSFT) Skype had user bases of 255 million and 300 million, respectively. Alphabet’s (GOOGL) YouTube had a monthly user base of 1.9 billion as of July 23.

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