What Was the Cause of the Twitter Stock Crash?

Social media giant Twitter was hit for an 8.5% loss of its share price as investors dumped the stock following surprising figures for its third-quarter financial report. All eyes had been on Twitter to announce that a profit had been recorded, but investors were stunned to find that the numbers revealed an adjusted loss.

The report showed that the overall loss was $0.54 for each share compared to a forecasted profit of $0.15 per share. It was a bitter blow for the social media platform particularly as the amount of free cash flow was lower than hoped due to expenses for things like litigation and investment in data centers.

The litigation relates to a lawsuit settlement paid by Twitter. This saw the social media platform paying out $766 million for a one-time charge that accused Twitter of having misled investors about important facts relating to how fast its customer base was expanding and how much time its users actually spent using the website and app.

This was coupled up with the fact that Twitter bosses were still cautious about the effects of Apple’s recent iOS privacy changes. These changes affected how a user’s personal data was accessed and used by advertisers and it had already had a profoundly negative impact on Snap’s quarterly results.

Room for optimism at Twitter

While the sudden loss of 8.5% in Twitter stock will have spooked investors, there is still plenty of reason to be optimistic about the social media titan’s future. Firstly, Twitter had enjoyed a 13% increase in the number of daily users. This saw 211 million actively engaged on the social media platform each day.

Although analysts were expecting to see 211.5 million active users, Twitter enjoyed a big revenue boost as a result of improved advertising sales in multiple sectors. In addition to this, there has been an extension to several big partnerships to provide video content such as the Dow Jones WSJ What’s Now series, as well as Fox Sports streams. This has caused some to suggest that Twitter’s fourth-quarter financial reports will bring in revenues of anywhere up to $1.6 billion with operating profits that could run up to $180 million.

Much of this will depend on how the social media platform adjusts to the privacy related changes in the iOS operating system. Twitter is planning to offer its users enhancements in areas such as personalization and conversations in the coming months, and there will be further measures introduced to help users get paid directly through the social media channel. Plus with extra options including a Progressive Web app that allows users to remove followers or allow creators to do a ‘Super Follow’, it shows that there’s plenty of innovation still underway at Twitter.

Some of these features have already been rolled out on Twitter, but with an estimated $10 billion lost by social media platforms to Apple’s iOS changes, it’s clear that Q4 could be a critical time for these tech giants.

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