News of the correspondence comes as Twitter faces increased attention over its viewership measurements, amid its legal battle with Elon Musk and following a whistleblower revelation last week that called into question the company’s incentives to measure. spam and fake bot accounts properly.
June 15 letter
Addressed to Twitter CEO Parag Agrawal, the agency asked about the company’s statement in its 2021 annual report that fake and spam accounts make up less than 5% of mDAU, the metric Twitter publicly uses to quantify size. of its user base. “Disclose the methodology used to calculate these figures and the underlying judgments and assumptions used by management,” the SEC said in the letter.
He also asked about Twitter restatement of your mDAU figures
for the previous three years in its March 2022 quarterly report. The SEC requested information on how and when the company discovered an error that previously caused it to overstate mDAU and how the company “concluded that there was no material weakness in its internal control over financial information and that its disclosure controls and procedures were effective as of March 31, 2022.”
Twitter explained in a letter
on June 22 that the percentage of fake and spam accounts is calculated “based on an internal review of a sample of accounts and the application of Twitter’s business judgment” and reiterated statements about the process included in Twitter’s quarterly reports. the company. It added that human reviewers evaluate thousands of randomly chosen accounts that Twitter considers mDAU and, using public and private data such as contact information and account activity, consider whether the accounts violate one or more of its anti-mail rules. unwanted and platform manipulation. Those evaluations are then subject to a multi-step review process, the company said.
Twitter said in the letter that its mDAU hype was the result of a feature launched in March 2021 that allowed people to link separate accounts to easily switch between them.
The company said the mDAU overstatement had no impact on any of its other key metrics or its financial statements. It added that it determined the overstatement was “immaterial” and therefore “there was no material weakness in its internal control over financial reporting.”
On July 27, the SEC answered
to Twitter saying it had completed its review of the 2021 annual report and March quarterly report. “We remind you that the company and its management are responsible for the accuracy and appropriateness of its disclosures,” the agency said.
Musk is currently fighting the company in court to get out of its $44 billion takeover deal, after accusing Twitter of misrepresenting the prevalence of spam and fake bot accounts on its platform. Musk’s lawyers have also questioned Twitter’s process for measuring mDAU. Musk agreed to buy Twitter on April 25, first saying the Twitter deal was “temporarily on hold” while he evaluated the bot issue on May 13, about a month before the SEC’s letter to the company. On May 17, he tweeted, “Twitter claims >95% of daily active users are real, unique humans. Does anyone have that experience?” before calling the SEC to assess the platform numbers. Hi @SECGov is anyone home? Neither Musk nor the acquisition were mentioned in the SEC’s letters to Twitter.
The case between Musk and Twitter is scheduled to go to trial in October.
Last week, former Twitter security chief Peiter Zatko filed an explosive whistleblower claiming the company has dangerous security and privacy breaches and accusing company executives of negligence and misleading users and regulators. Among the allegations in the disclosure, which was sent to the SEC and other US regulatory agencies, are claims that Twitter does not have an accurate count of the number of spam and fake bot accounts on its platform and that the company has few incentives to undertake. a full count.
Twitter criticized Zatko and broadly rejected his accusations, saying the disclosure paints a “false narrative” of the company and is “riddled with inconsistencies and inaccuracies.”
Twitter and the SEC declined to comment on the SEC correspondence.