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Why Did Twitter Shares Gain 20% in 2018?

By Daniel B. Kline – Updated Apr 17, 2019 at 8:15PM

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The social media company handled some things better than a certain rival.

What happened

Twitter (TWTR) had a very high-profile year, at least partly because of President Trump's fondness for the medium. The company also benefited from the very public missteps at Facebook (META 0.85%), its chief rival in the social-media space.

The company stabilized and grew its business in 2018. In the third quarter, for example, revenue grew by 29% to $758 million from the same quarter a year ago. Average daily users were up 9% year over year in Q3 and 11% in Q2.

It's also worth noting that Twitter CEO Jack Dorsey has been more credible and open on privacy issues than Mark Zuckerberg has. That has added to Facebook's woes while almost certainly helping its rival.

"We're doing a better job detecting and removing spammy and suspicious accounts at sign-up," Dorsey said in the Q3 earnings release.

A talk bubble shows two Twitter birds

Twitter had a strong year with big advertising growth. Image source: Getty Images.

So what

Twitter has shown it can sidestep some of the problems that have plagued Facebook and grow its revenue. That has been good for its share price, which closed 2017 at $24.01 and rose to $28.74 on the final day of 2018, a nearly 20% gain, according to data from S&P Global Market Intelligence.

Part of the company's success came from changes it made to its interface. Dorsey explained some of those in his remarks in the earnings release.

"We're also continuing to introduce improvements that make it easier for people to follow events, topics, and interests on Twitter, like adding support for U.S. TV shows in our new event infrastructure," he said. "This quarter's strong results prove we can prioritize the long-term health of Twitter while growing the number of people who participate in public conversation."

Now what

Dorsey still has to steer his company around potential controversy. The nature of the platform makes it especially vulnerable, because it has to navigate the line between free speech and hate speech. That means some members will anger others while not violating the operating terms of the site.

Doing that requires transparency, and Dorsey has recently handled things well. If he can keep Twitter's reputation positive, than he should be able to continue to grow the company's advertising business as well as inch its user base higher.

Check out the latest Twitter earnings call transcript.

Daniel B. Kline owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.

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