Twitter's New Rules: Lip Service or Real Change?

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Twitter (NYSE: TWTR) recently introduced new rules to target "unwanted sexual advances, non-consensual nudity, hate symbols, violent groups, and tweets that glorify violence" across its social network. Twitter will also require deeper account reviews for harassment reports, and hire nearly 300 people to its Trust and Safety unit to oversee complaints and ban abusive accounts.

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CEO Jack Dorsey tweeted that the new measures were introduced in response to "voices silencing themselves" during the #WomenBoycottTwitter trend which erupted after actress Rose McGowan's account was suspended for tweeting about sexual abuse in Hollywood. Dorsey admitted that Twitter wasn't "doing enough" to counter these problems, but users expressed doubts that the rules could be adequately enforced.

We've been down this road before...

Twitter repeatedly lost control of its content in the past. ISIS and other extremist groups have used it as a recruitment tool, and tragedies like the Boston Marathon Bombing sparked a surge of fake news, much of which was posted to cause confusion. News accounts were even hijacked to crash stocks.

High-profile cyberbullying incidents, like the attacks on Zelda Williams after the death of her father, Robin Williams, caused many critics to question the lack of censorship on the platform. 

Recent revelations also indicate that Russian operatives used fake Twitter accounts and ads to split Americans and incite social chaos during and after the election. After each of these PR disasters, Twitter declared that it would tighten its rules and enforce them more aggressively.

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But did Twitter really do anything better?

Many critics dismiss Twitter's promises as mere lip service. But Twitter has taken some steps to right its ship. It banned hundreds of thousands of terror-linked accounts, through the use of "internal, proprietary, spam-fighting tools." It suspended accounts for cyberbullying and shut down hundreds of fake Russian accounts.

However, Twitter's suspension of Rose McGowan and its constant defense of misuse on the platform has led many to criticize the company. Twitter also only banned troublesome accounts after most of the damage was done.

Twitter's main problem is a lack of oversight in its active accounts. Users can open multiple accounts and use them as bots because Twitter considers them useful marketing tools. As a result, a recent study by the University of Southern California and Indiana University found that up to 15% of Twitter's "active" users are likely bots.

As for abusive human users, Twitter often suspends accounts only after multiple complaints are received within a short time. Trolls sometimes exploit that algorithm by coordinating complaints against a single account -- thus letting them use anti-troll tools against their victims.

A toxic mix for Twitter...

Twitter faces all these problems with a distracted CEO who splits his time between leading Twitter and Square (NYSE: SQ). An alarming number of executives have also left Twitter since Dorsey's return in late 2015, leaving key leadership positions open or in the hands of newcomers.

Meanwhile, Twitter faces stagnant user growth and declining ad revenues. Its monthly active users (MAUs) rose just 5% annually to 328 million last quarter, its ad revenues fell 8% to $489 million, and it remains unprofitable on a GAAP basis.

By comparison, Facebook's (NASDAQ: FB) MAUs rose 17% annually to 2.01 billion last quarter, its ad revenues surged 47% to $9.16 billion, and its net income jumped 71% to $3.89 billion. Those numbers indicate that Facebook's enclosed network of family, friends, and real-life acquaintances is generally a more appealing advertising platform than Twitter, which remains the volatile "Wild West" of the social media world.

The bottom line

Twitter realizes that harassment and hate speech are growing problems on its site, but it must walk a fine line between moderating content and censoring it. Its operating expenses will also likely rise as it expands its Trust and Safety unit, dousing hopes of the company ever generating a GAAP profit. Therefore, Twitter still has a lot to prove before it can be considered a potential turnaround play.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool owns shares of Square. The Motley Fool has a disclosure policy.