Editor's note: A paragraph incorporating a statement from Twitter has been added to this article. The new paragraph is the penultimate one.
Twitter (NYSE:TWTR) has reportedly suspended more than 1 million fake and suspicious accounts a day in recent months, for a total of 70 million in May and June. That rate continued into July, according to data obtained by The Washington Post, and it's double the pace at which Twitter shut down accounts in October.
Removing accounts spreading misinformation and spamming the social network is something all social media companies have to deal with. Facebook (NASDAQ:FB) removed 583 million fake profiles in the first quarter. Overall, such moves improve the usability of each platform by removing bad actors.
For Twitter, however, the sudden rise in fake-account deletion over the first half of the year could result in a decline in its "active user" numbers when it reports second-quarter results at the end of the month. That could ultimately impact the company's financials.
Deleting accounts usually isn't a big deal
Suspending and removing fake, spam, and potentially harmful accounts from a social network is generally a good thing. These bad actors don't add any value to a social network like Twitter or Facebook. In fact, they can decrease the value of a social-media platform by increasing the amount of misinformation and offensive content users see.
Importantly, since many of these accounts are created and run by bots -- computer programs that automatically create and post content -- they don't add any value to the advertising business either. These aren't the kinds of accounts that click on ads.
So, when Facebook reports that it got rid of over half a billion accounts in three months earlier this year, it has a minimal impact on its business. The company has long been transparent that it believes between 3% and 4% of the active accounts it reports every quarter are fake profiles. That number hasn't changed.
Why it's a big deal for Twitter
Twitter maintains its number of fake accounts is similar to Facebook's and below 5% of its reported active users. The recent ramp-up in shutdowns calls that number into question.
Twitter may have had too loose a definition of what constitutes a fake account, bolstering its active user numbers and decreasing its reported percentage of fake accounts. Twitter has become more stringent on fake accounts this year, following accusations that Russians used fake Twitter accounts to influence the 2016 elections.
That may lead to a decrease in Twitter's reported active accounts. In and of itself, that shouldn't be a big deal; as mentioned, these kinds of accounts aren't viewing or clicking on ads. And since advertisers only pay when a user engages with an ad, fake accounts aren't generating any revenue for Twitter.
But a big part of Twitter's new pitch to advertisers is an increasingly engaged user base. Twitter has touted a daily active user base that's grown by double-digit percentage points for six straight quarters. Twitter is otherwise quiet about its user engagement.
It's worth noting that the majority of Twitter's ad revenue still comes from its direct-sales team. That means those vanity metrics like daily active user growth are actually important to Twitter. If the increased account suspensions and deletions cause a slowdown in daily user growth, it could ultimately impact Twitter's ability to sell ads to brand advertisers down the line.
In a response to The Washington Post report, Twitter CFO Ned Segal told investors the 70 million account suspensions won't impact user metrics. Most of the accounts are either inactive or stopped right when they're signing up, he said. If that's the case, however, it means Twitter isn't stopping very many active malicious accounts, which negatively impact the value of its platform. So, either Twitter will see an impact on its user metrics or the amount of spam and disinformation on its network won't improve. Either way, it's not a great situation for Twitter.
Pay close attention to Twitter's user metrics when it reports its second-quarter earnings results on July 27. If they come in significantly lower than the first quarter, look to see if management has any additional commentary on those numbers.