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Twitter earnings show first-ever profit as bot issue lingers

Slow user growth continues as the social network deals with millions of fake accounts tweeting and retweeting across its platform.

Twitter logo on a screen

Twitter had a decent end to 2017, despite its bot problem.

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There are millions of fake accounts tweeting, retweeting and liking many of the most high-profile accounts on Twitter. So what is the company going to do about it?

The issue's been bubbling under the surface at Twitter for years, but was brought to the forefront last month by The New York Times, which uncovered companies that make their money by inflating the number of followers celebrities, business executives and even one of Twitter's own board members have. They do this with bots, automated computer programs that sometimes pose as real people. Twitter began purging millions of fake accounts in response.

The concern over bots is the latest black eye for Twitter, which struggles with everything from revenge porn and nonstop harassment among some users to concerns about how its service may have been used by Russian operatives in an attempt to influence the 2016 election.

Despite those issues, Twitter on Thursday posted a $91.1 million profit -- its first-ever profit -- on $731.6 million of revenue. Shares spiked as much as 23 percent to $33 a share in early market trading. 

During an earnings call with analysts, Twitter CEO Jack Dorsey said briefly the company is tackling the bot issue with a new "information quality" strategy to detect and remove spam, malicious activity and fake accounts. The company will also help users "identify more authentic and credible accounts and tweets," he said.

Still, it's hard to tell how many fake accounts are out there. A study released last year found as much as 15 percent of active Twitter accounts were controlled by bots. Twitter says only about 5 percent of its accounts are run by bots.  

Gartner analyst Brian Blau said investors are willing to stick with Twitter as it figures out its bot problem.

"Investors are in it for the money and if they view some of these problems as solvable, then they are satisfied that Twitter is on the right path, for now," he said.

Meanwhile, Twitter's user growth remains stagnant. For the three months ended Dec. 31, the number of monthly active users stood at 330 million, another data point in the its long trend of low, single-digit growth. The overall figure isn't near rival Facebook, which counts 2.13 billion users.

Twitter Chief Financial Officer Ned Segal said during Thursday's call that the monthly user total remained flat because Apple made changes to its Safari web browser that lowered Twitter's user count by 2 million. (Segal has previously said changes to the Safari interface affect some third-party apps, including Twitter.) The company's recent removal of fake and dormant accounts also hit the number of users.

Segal said Twitter's daily active users also rose 12 percent from a year ago, but the company doesn't disclose that figure.

Dorsey told analysts that increasing tweets to 280 characters prompted users to spend more time on Twitter. The expanded length led to an increase in retweets and mentions, even though doubling the number of characters from the original 140 hasn't changed the length of tweets users send, he said. 

"We do believe that it's minimizing some of the complexities and confusion around Twitter in general," Dorsey said, without getting into specifics.

James Cakmak, an analyst with Monness, Crespi, Hardt & Co., said Thursday that Twitter's major investments, including live video of news and sports-related content, appear to be paying off. Still, he wonders how long this momentum will last.  

"There's a multitude of positives including positive revenue growth, greater utility from daily users, and higher profits," he said. "But questions linger over sustainability given an increasingly saturated user base."

CNET's Roger Cheng contributed to this report.

Originally published Feb. 8, 4:13 a.m. PT.
Update, 7:30 a.m. PT: Adds comments from Twitter's executives and an analyst.
Update, 9:30 a.m. PT: Adds comments from an another analyst.

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