Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Twitter’s Very Real Fake Problem

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

A new report from Twopcharts reveals a massive problem with Twitter (NYSE: TWTR  ) -- approximately 44% of its 974 million users have never tweeted. Moreover, 30% of Twitter's accounts (292 million users) have only tweeted one to 10 times, while only 13% of all accounts (127 million) had tweeted over a hundred times. Those dismal numbers paint a dramatically different picture from the 241 million "active" users that the company claims.

But that's not all -- StatusPeople's Fake Follower Check tool, which uses an algorithm to determine how many followers are fake or inactive, revealed that 80% of President Obama's 42.5 million followers are fake or inactive accounts, as are 75% of Lady Gaga's 41.3 million followers. By comparison, Facebook (NASDAQ: FB  ) estimates that only 5.5% to 11.2% of its accounts are fake.

StatusPeople discovered that 6% of my followers are fake, and 40% are inactive. Source: Author.

Combine these factors with a growing black market that sells users thousands of fake Twitters followers for a few dollars, and we realize that Twitter is less of a social network than a social mirage. Let's take a closer look at how Twitter's "fake" problem, which it continually ignores, could become a real one very soon for the company.

Why Facebook is more sustainable than Twitter 
Facebook has a much more sustainable business model than Twitter for a simple reason -- it faces inward while Twitter faces outward.

Facebook is a closed network in which users confirm friend requests, share their life updates via a News Feed, and categorize contacts into different lists such as families, friends, and co-workers. Users can separately set up business and fan pages on Facebook to build a following.

Twitter, on the hand, is a place where people shout 140-character messages into a hashtag-filled river in the hopes of gaining more followers. It's a business model set up to encourage endless self-promotion.

As a result, the meaning of a friend count on Facebook and a follower count on Twitter mean opposite things. It's odd to have 5,000 Facebook friends, yet it's prestigious to have 5,000 Twitter followers. The reason is simple -- Facebook is associated with personal information (your real life) while Twitter is associated with fame among strangers (your public image). Simply put, no one wants 5,000 stalkers but everyone wants 5,000 fans.

Sustaining the business of Twitter's mirage
The problem with Twitter's business model is that it encourages attention-seeking users to build tall soapboxes on the backs of their followers. Moreover, followers generally associate larger followings with more fame. That's where the shady business of selling fake followers comes in.

Individuals and businesses can deliver hundreds to thousands of Twitter followers for $1 to $1,000. These companies use automated software to randomly generate user names and profile details, then direct them all to simultaneously follow a client. Of course, none of these bot followers actually care what you have to say -- it's all window dressing to make your account look more attractive., one of many Follower vending services. Source: Author's screenshot.

That's not to say that the window dressing doesn't work. Some individuals and businesses have reported that buying a few thousand followers definitely gives them more credibility, leading to more "real" followers tuning in. However, employers in the social media industry have started weeding out "fakers" by using software like StatusPeople's Fake Follower Check to determine an applicant's true social influence.

Twitter has occasionally tried to zap these fake accounts, but since the businesses providing them are so easy to set up, they pop back up like weeds. Italian security researchers and bloggers Andrea Stroppa and Carla De Micheli estimated last year that businesses selling fake Twitter followers have raked in $40 million to $360 million -- a number that is steadily rising alongside Twitter's real user base.

Should Twitter be worried?
Financially, Twitter is suffering from a classic problem that crushed many promising tech companies in the past -- decent top line growth weighed down by big expenses. In fiscal 2013, Twitter's revenue jumped 110% year-over-year to $665 million. Unfortunately, a net loss of $645 million -- down from a loss of $79 million a year earlier -- completely wiped that out.

TWTR Chart

Source: Ycharts.

89% of Twitter's top line is generated by advertising through three main products -- Promoted Tweets, Promoted Accounts, and Promoted Trends. Balancing those three sources of revenue is tough, especially since over-promoting them can tarnish Twitter's reputation as an unfiltered live news feed. The good news is advertisers are still biting -- advertising revenue per thousand timeline views rose 76% year-over-year to $1.49 in the fourth quarter of 2013.

The problem is that advertisers will eventually notice Twitter's problem with fake followers and inactive accounts. If Twitter fails to weed out these accounts, they could adversely impact the company's pricing clout with advertisers. Moreover, Twitter has stated that the "substantial majority" of its advertising revenue is generated on a pay-for-performance basis, in which "advertisers are only charged when a user engages with their ad." Unfortunately, I doubt that bots or inactive users click any ads at all.

Not all is lost
There's a bright side to all of this. The fact that users are willing to buy fake accounts speaks volumes regarding the necessity of Twitter, which has arguably become the social backbone of our culture.

However, Twitter needs to clean house soon to avoid being buried by junk accounts that ruin the site's reputation. It can do this by updating its APIs and banning fake account peddlers. Unfortunately, I suspect that Twitter realizes that its self-sustaining beast of fame and vanity is evolving well beyond its control, and efforts to weed out the imposters could ultimately be futile and costly to its bottom line.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 15, 2014, at 7:34 PM, My535 wrote:

    The value of twitter derives more from what is being said by people who's opinions are valued than hearing what the broad twitteratti have to say. I have yet to determine how may followers someone on twitter has.

  • Report this Comment On April 16, 2014, at 7:18 PM, chiproberson wrote:

    I think this is a topic that is worth serious consideration and I'm glad you're writing about it. I would like to point out a few issues one should consider.

    First, while I trust StatusPeople's Fake Follower Check to give an indication of how many followers are fake, we have to take that with a grain of salt. For one, I don't know if anyone has independently verified the accuracy of its algorithm. For another, while I think its sampling method is probably pretty good for accounts up to a certain size, I am not ready to blindly accept that its sampling method is accurate enough to make bold statements about populations that are of significant size (e.g. in the millions). A poor sampling method (which might be under Twitter's API control and not StatusPeople's) could skew the results one way or the other. We just don't know if we can trust it without independent verification.

    Two, it's not entirely equivalent to compare the "fakeyness" (to borrow for Stephen Colbert) of Twitter followers and Facebook fans or friends. To begin with, fans and friends are themselves different and Facebook fans are more like Twitter followers than Facebook friends are. Additionally, because of the closed inward-looking nature of the Facebook ecosystem, it's actually somewhat hard to identify and weed out the fakes on Facebook. So, Twitter is to some respects being punished for being open (which makes it easier to perform the analysis).

    Having just been spoofed myself on Facebook ( and seeing the daily Google Alerts for both Facebook and Twitter (see EASportsFIFA), I know its a problem for both platforms.

    I don't want to be an apologist for Twitter as I think it needs to find a way to clean up its ecosystem. There is a lot of dead wood on both platforms as our Brandle Presence Manager is constantly finding for our customers. The problem is that Twitter nor Facebook make it easy to clean up these derelict, fake or fraudulent accounts/pages/places, etc. There is a lot of flotsam and jetsam out there.

    On a related note, our recent Brandle study of the social media presence of the Top 25 mortgage companies supports part of your argument. The study basically showed that investment in social media correlates with general market performance. However, there was one very significant exception in a primary Twitter account for the company in 25th place. It turns out that according to StatusPeople's fake follower check, most of that account's followers were fake. Once we corrected for those fakes, this company return to within the standard deviation around the trend line.

    I think Twitter and Facebook both need to mature and add greater tools for authenticity and governance. Unfortunately, I don't think they see the return on the investment required to do that.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2915412, ~/Articles/ArticleHandler.aspx, 8/27/2015 8:29:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Leo Sun

Leo has covered the crossroads of Wall Street and Silicon Valley since 2012. Follow him on Twitter for more updates!

Today's Market

updated Moments ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:01 PM
TWTR $26.46 Up +1.43 +5.71%
Twitter CAPS Rating: ***
FB $89.73 Up +2.54 +2.91%
Facebook CAPS Rating: ***