Something doesn’t smell right at Twitter Inc.
The company on Thursday blamed a lower-than-expected rate of third-quarter revenue growth, and a disappointing sales forecast for the current quarter, in part on “bugs” in one of Twitter’s types of advertisements and to errors Twitter made to use people’s personal information in ways they didn’t expect.
In total, Twitter said these issues reduced the company’s growth rate by at least 3 percentage points in the third quarter. That’s a significant hit to what was a reported growth rate of 9%. Twitter said the same issues might continue to be a drag on advertising sales into next year.
Twitter’s explanation for this revenue problem was insufficient and also an acknowledgment that the company has been breaking users’ trust. That should invite hard questions from regulators. It also hurts Twitter’s credibility, which remains fragile after a long stretch of business underperformance and instability. Twitter’s shares were falling about 19% in early trading on Thursday.
Essentially, Twitter said it took a financial hit because it stopped abusing people’s personal privacy choices. The company disclosed in August that it had been mistakenly ignoring people who said they didn’t want some information about them shared with Twitter’s advertisers or other partners.
That meant, for example, that Twitter might have been allowing a mobile game company to target ads at Twitter users based on whether they were using a recent model of iPhone — even if people explicitly told Twitter they didn’t want marketers to have access to this type of information.
The company has not said before Thursday that fixing its privacy mistakes would hurt the company’s revenue. Investors should be pushing Twitter harder to answer why management didn’t disclose a possible ad sales dent until now. And what does it say about the quality of Twitter’s advertising — and the internet surveillance economy in general — that ending privacy-violating settings dented Twitter’s ad sales?
Twitter’s recovery is mostly real. The company remains nicely profitable, which wasn’t true for a long time. It continues to both hold onto and add users. But when the company minimizes mistakes it made that breach its promises to users and hurt its business, it’s easy to get flashbacks to the bad old days. The company needs to do better than this. – Bloomberg
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