Here's a burning question that Twitter (NYSE:TWTR) needs to answer soon: how accountable should it be for the hate groups, terrorist organizations, criminals, and trolls flourishing on its network?
In mid-2013, the Simon Wiesenthal Center reported that Twitter spurred a 30% growth in online forums for hate and terror groups over the previous year. That problem has become painfully visible in mainstream news today.
Twitter has been used as a publicity tool by ISIS and other terrorist groups. Fake news stories from hacked Twitter accounts caused have stock market crashes. Penny stock pumping bots exploited high frequency trading firms' dependence on Twitter's "firehose" feeds. In January, bomb threats from a Twitter troll grounded two airplanes. All the while, escalating reports regarding racist, sexist, and homophobic cyberbullying and death threats continued to haunt the network.
Twitter has acknowledged these problems. In an internal memo, CEO Dick Costolo admitted that Twitter "sucked" at dealing with abuse and trolls, and that it was losing "core user after core user" by not addressing those issues. Unfortunately, Costolo hasn't offered any real solutions yet.
How Twitter became a river of chaos
To understand how Twitter devolved into a river of chaos, we need to consider three key factors. First, Twitter's monthly active users (MAU) only rose 20% year-over-year to 288 million users last quarter, missing Wall Street estimates by 7 million users.
Second, Twitter admitted that 8.5% of its MAUs, or 24.5 million "people," used "third party applications that may have automatically contacted our servers for regular updates without any discernible additional user-initiated action." Simply put, those "active users" might just be retweeting bots.
Yet Twitter partially relies on those bots to power the firehose feed of data which news agencies, high frequency trading firms, and even Google (NASDAQ:GOOG) (NASDAQ:GOOGL) subscribe to. Revenue from those deals, reported under the data licensing category, accounted for nearly 10% of Twitter's top line last quarter.
In my opinion, Twitter is afraid to disappoint investors with lackluster MAU growth, so it turns a blind eye to the proliferation of bots, which it needs to fuel its firehose business. If it decides to invest in new policing tools to purge fake and controversial accounts, expenses will rise and MAUs could fall.
Why Twitter should be held accountable
If Twitter were a cable TV network which aired ISIS propaganda, penny stock scams, and fake bomb threats around the clock, the government would have quickly taken it off the air.
Yet Twitter, like all social media companies, claims to be an advocate of free speech which has no direct control over its users' tweets. Twitter could hide behind that argument when it had 30 million MAUs back in 2010, but its MAUs today are on the verge of eclipsing the population of the United States.
To be fair, Twitter cooperates with the U.S. government roughly 80% of the time when account information, a user's location, or even deleted tweets are requested. Between last July and December, Twitter reported that the U.S. made 1,622 requests for account information. That's up from 833 requests during the same period in 2013.
However, Twitter should still be held accountable for helping hate groups, terrorists, and trolls spread their messages for a simple reason -- it profits from their presence. All those controversial accounts are being counted as MAUs, which are used to determine the costs of Promoted Tweets, Trends, Accounts, and Videos to marketers. But here's the bitter irony -- if Twitter is seen as an anarchy flooded with controversial tweets, companies might choose to buy ads on Facebook (NASDAQ:FB) or Google instead.
What Twitter needs to do
Twitter introduced more streamlined harassment reporting tools last December, but many users believe that it's a band-aid that does little to address the real problem -- the company's inability to spot and boot problem accounts.
For example, Weibo (NASDAQ:WB), China's equivalent of Twitter, spends a large portion of its revenue paying a team to monitor and censor its posts. For Weibo, the stakes are high -- the Chinese government could shut down the site at any time for spreading "offensive" messages. Although it's doubtful that the U.S. government will ever shut down Twitter outright, the company might have to actively shut down known hate group, terrorist, or troll accounts, rather than merely reacting after an incident occurs.
Online vigilantes, apparently fed up with Twitter's apathy, have already taken matters into their own hands. For example, hacktivist group Anonymous reportedly shut down dozens of ISIS-related Twitter accounts in early February. Last November, the group also took over the KKK's Twitter account in response to offensive messages regarding the Ferguson protests.
Easier said than done ...
Twitter selectively censoring itself is easier said than done, and could raise all sorts of free speech issues. But we should remember that Twitter already censors content in certain countries, and tightening its controls in the U.S. would merely be an extension of that policy.
Looking ahead, if Twitter fails to police itself effectively, I believe that its average revenue per user (APRU) might decline as marketers look to more socially responsible platforms to advertise on.