Investors learn Silicon Valley can be volatile as Twitter tanks

Twitter’s share price was slashed by 18% as the market opened this morning, with the social media giant failing to find enough consistency to impress investors.

There was a brief glimmer of hope that Twitter might have been a company people could rely on, but rainclouds have once again emerged to spoil the parade. It certainly isn’t corporate doomsday for Twitter, but the management team will have to start ensuring some consistency if they want to remain in their current employment for the long-term.

Looking at the results, total revenues for the three-month period stood at $824 million, a 9% year-on-year increase, but short of the $876 million analysts estimated. Unfortunately for any optimists, the next quarter isn’t looking much better.

Twitter is forecasting revenue to be between $940 million and $1.01 billion for the next three months, down on the $1.06 billion which was estimated by analysts. Operating income is expected to be in the $130 million and $170 million range.

Although the steep decline in share price has largely levelled off, it does not make for comfortable reading.

The question which remains is what went wrong at Twitter? Looking at the materials presented during the earnings call, the management team is pointing to two areas. Firstly, seasonality. Twitter is suggesting fewer users were using the platform during the summer months than it was expecting, partly due to a lack of major events which were taking place over July and August.

Secondly, bugs in the legacy Mobile Application Promotion (MAP) product impacted the ability to target ads and share data with measurement and ad partners. The team also discovered certain personalization and data settings were not operating as expected. Twitter estimates the product issues reduced year-over-year revenue growth by 3 or more points in Q3.

Although these figures, this quarter and the next three months, are not the best it does not demonstrate the business is fundamentally flawed. This should not be seen as a company which will fall off a cliff, next year could be much more promising.

Firstly, the team is retiring legacy products and introducing new systems constantly, as well as creating more opportunities for those advertisers who are craving video engagement. This is an area which Twitter lags behind other social media platforms, though it could certainly catch-up.

Secondly, when you look at what is going to happen over the next 12 months, it would suggest there will be increased engagement from users and therefore increased opportunity for advertisers. In Europe, you have the UEFA European Championships, in the US, the Presidential Election and in Japan, the Tokyo 2020 Olympics. All of these events present major opportunities for Twitter to engage users.

Looking at user engagement, Twitter has decided to alter the way it reports figures, creating its own metric which will be known as ‘monetizable daily active users’ (mDAU). This could be a useful way to measure engagement, and the explanation below is taken from the letter to shareholders:

“Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active user base. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three months ended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year.”

In short, it is the number of users which can be served ads each day. Using this metric, Twitter estimates it was able to serve ads to 145 million people each day, on average, which is a 17% increase on the same period of 2018.

The only issue with this metric is that it isn’t the most transparent when it comes to app downloads or concrete figures on daily usage. That said, according to data from Sensor Tower, it is still one of the most popular social media applications worldwide.

These results are not representative of a company which is in trouble, but more demonstrates the volatility of the internet segment. It was a bad three months, but that does not necessatily make Twitter a bad company. There are few companies which emerge from the garages of Silicon Valley which are genuinely reliable, but Twitter is one which will probably get better.

The fundamentals of the business are pretty sound. Assuming the team continue to improve the user experience and fix the bugs in the advertising machine, it will make money. Events across 2019 will attract more people only the platform, especially with social media likely to feature very prominently through the 2020 Presidential Election campaign. Perhaps the market needs to take a reality check on how much money it expects Silicon Valley to hoover up.

If 52% don’t understand data-sharing economy, is opt-in redundant?

Nieman Lab has unveiled the results of research suggesting more than half of adults do not realise Google is collecting and storing personal data through usage of its platforms.

The research itself is quite shocking and outlines a serious issue as we stride deeper into the digital economy. If the general population does not understand the basic principles behind the data-sharing economy, how are they possibly going to protect themselves against the nefarious intentions from the darker corners of the virtual world?

You also have to question whether there is any point in the internet players seeking consent if the user does not understand what he/she is signing up for.

According to the research, 52% of the survey respondents do not expect Google to collect data about a person’s activities when using its platforms, such as search engines or YouTube, while 57% do not believe Google is tracking their web activity in order to create more tailored advertisements.

While most working in the TMT industry would assume the business models of the Google and the other internet are common knowledge, the data here suggests otherwise.

66% also do not realise Google will have access to personal data when using non-Google apps, while 64% are unaware third-party information will be used to enhance the accuracy of adverts served on the Google platforms. Surprisingly, only 57% of the survey respondents realise Google will merge the data collected on each of its own platforms to create profiles of users.

Although this survey has been focused on Google, it would be fair to assume the same respondents do not appreciate this is how many newly emerging companies are fuelling their spreadsheets. The data-sharing economy is the very reason many of the services we enjoy today are free, though if users are not aware of how this segment functions, you have to question whether Google and the other internet giants are doing their jobs.

The ideas of opt-in and consent are critically important nowadays. New rules in the European Union, GDPR, set about significant changes to dictate how companies collect, store and use personal information collected by the service providers. These rules were supposed to enforce transparency and encourage the user to be in control of their personal information, though this research does not offer much encouragement.

If the research suggests more than half of adults do not understand how Google collects personal information or uses it to enhance its own advertising capabilities, what is the point of the opt-in process in the first place?

Reports like this suggest the opt-in process is largely meaningless as users do not understand what they are giving the likes of Google permission to do. The blame for this lack of education is split between the internet giants, who have become experts at muddying the waters, and the users themselves.

Those who use the services for free but do not question the continued existence of ‘free’ platforms should forgo the right to be annoyed when scandals emerge. Not taking the time to understand, or at least attempt to, the intricacies of the data-sharing economy is the reason many of these scandals emerge in the first place; users have been blindly handing power to the internet giants.

The internet players need to do more to educate the world on their business models, however the user does have to take some of the responsibility. We’re not suggesting everyone becomes an internet economy expert, but gaining a basic understanding is not incredibly difficult. However, it does seem ignorance is bliss.

Facebook back on the ropes with more privacy punches

Facebook faces fresh questions surrounding data privacy, with reports emerging it granted advertising customers access to user’s private messages with friends and family.

This is a company which is not helping itself but is looking increasingly suspect. The data and sharing economy does of course require users to make an exchange in order to receive free services, but the personalised advertising machine created by Facebook is starting to look scary. The detail which is known on users, and the apparent nonchalant approach the firm has to abuse of the platform, is starting to become very worrying.

Now we have one of the most worrying accusations. According to the New York Times, new documents have emerged suggesting Facebook granted permissions to advertisers which seemingly go far beyond the consent granted by users.

Among the accusations, sourced from internal documents, Netflix and Spotify were given the ability to read user’s private messages, while Bing was able to access all information about a user’s connections without specific consent. Amazon was given permission to obtain contact information through indirect connections, and Yahoo was allowed view streams of friends’ posts. The Yahoo partnership can be traced back to this summer, long after Facebook had declared such practises had been ended.

Aside from the NYT investigation, one user has also taken the time to pen her frustrations after realising location controls on the platform made no difference to personalised advertising. Aleksandra Korolova turned off all available location services on Facebook, WhatsApp and Instagram, cleared location details off her profile, removed geo-tagging on photos, but was still receiving personalised ads based on recent movements.

“Reading Facebook’s explanations to advertisers provides insight into how this is done,” said Korolova in a Medium post. “Specifically, Facebook tells advertisers that it learns user locations from the IP address, WiFi and Bluetooth data.”

The illusion of control has been created, though Facebook is finding ways around user consent and loopholes to any commitments it has previously made.

The inability for Facebook to be transparent, clearly telling the user what is going on, is incredible. There are so many examples of this company misleading the general public, governments and regulators, they are becoming difficult to count. This is a toxic company which should not be trusted. We are struggling to believe any statement which the company is now making.

In response, Konstantinos Papamiltiadis, Director of Developer Platforms and Programs, has gone to Facebook’s standard response.

“…we recognize that we’ve needed tighter management over how partners and developers can access information using our APIs,” said Papamiltiadis. “We’re already in the process of reviewing all our APIs and the partners who can access them.”

This seems to be Facebook’s new response to accusations which question whether it has acted ethically or legally; partially accepting responsibility and saying they will do better in the future. This is not a good enough answer anymore. It might have worked the first couple of times, but the repetition from Facebook executives just shows how little the company thinks about the general public. We are just assets to be traded in the pursuit of greater advertising revenues.

Privacy is a small hurdle; the grey expanses of technology regulation are too wide for this to be a problem. Facebook is making a mockery of the general public and the data privacy landscape.