BLOG Investors Step Back From Social-Media Highfliers

Published: Aug 17, 2018 2 min read
Reading Time: 2 minutes

By Marc Vartabedian

Source: Wall Street Journal

Shares of Twitter Inc. TWTR -8.03% and Facebook Inc. FB -2.19% endured a surprise rout this week, as investors were rattled by signs that users are souring on the social-media stalwarts.

Twitter said Friday that its number of monthly users dropped in the second quarter and could continue to fall as it purges fake accounts, results that echoed Facebook’s bombshell guidance Wednesday that its growth is expected to slow through the end of the year.

Both companies suffered share-price declines of more than 20% after results. Facebook’s drop of over 19% on Thursday lopped more than $119 billion from its market value—the biggest single-day drop in U.S. market history. Twitter lost almost $7 billion.

“We’re two for two being down 20%,” said Brent Thill, an analyst at Jefferies, adding, “It has not been a great week.”

The S&P 500 dropped 1% over the last two trading days of the week, its largest two-day point and percentage decline this month, as the disappointing earnings reports put pressure on the technology sector. The tech-heavy Nasdaq Composite suffered a bigger loss of 2.5% over the same period.

Facebook and Twitter have different business models but each is dependent on grabbing—and keeping—people’s attention and then showing ads to them. That imperative on occasion has led them to embrace content that is viral or provocative, and now they are trying to find a better balance that will keep users engaged without driving them away. For instance, both are scrambling to clean up their platforms, which were the epicenter of Russian misinformation campaigns around the 2016 U.S. presidential election.

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