Parag Agrawal, CEO of Twitter, and his wife Vineeta Agarwal, walk to a morning session during the Allen & Company Sun Valley Conference on July 07, 2022 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images News | Getty Images
The Securities and Exchange Commission asked Twitter in June for additional information on how it calculates the percentage of spam accounts on its platform, new filings revealed on Wednesday.
Twitter’s spam account calculations have been the focal point of Tesla CEO Elon Musk’s countersuit against the company, which initially sued him for trying to get out of his $44 billion deal to buy the platform. Musk has questioned Twitter’s assertions that less than 5% of its monthly daily active users are spam accounts, as it states in its securities filings. Twitter has stood by that figure.
Wednesday’s disclosure shows it’s not just Musk who sought to validate Twitter’s calculations, though nothing in the filings indicates the agency is formally disputing the numbers or pursuing legal action.
The filings come a day after a whistleblower, former Twitter security lead Peiter “Mudge” Zatko,” alleged “extreme, egregious deficiencies by Twitter” related to privacy, security and content moderation.
Twitter did not immediately respond to a request for comment.
In a letter to Twitter CEO Parag Agrawal on June 15, the SEC asked Twitter to disclose its methodology for accounting for spam accounts, to the extent that it’s material. The agency also asked for clarification on how Twitter discovered an error in its monthly daily active user (mDAU) calculations from 2019. Twitter disclosed the error this year, saying it had previously overstated the figure.
“Given that the error persisted for three years, please tell us how you concluded there was not a material weakness in your internal control over financial reporting and that your disclosure controls and procedures were effective as of March 31, 2022,” the SEC wrote.
In a letter on June 22, a lawyer for Twitter from Wilson Sonsini responded to the SEC’s questions. They wrote that Twitter has humans manually review thousands of randomly chosen accounts out of those it counts as mDAUs. The reviewers are given a set of rules defining spam or platform manipulation, and an account is marked as spam or false if it violates at least one of those rules, they wrote.
The company also explained why it didn’t think there was a material weakness in its internal financial reporting controls as a result of the overstatement of mDAUs in 2019. It said data scientists at the company discovered the overstatement in 2022 while investigating potential new product features for secondary accounts. They found that when users had separate accounts linked together, its system would count all the linked accounts as mDAUs, even if just the primary account was active in that period.
Twitter said the overstatement did not impact other metrics or its financial statements and that “the overstatement represented less than one percent of mDAU for each of the quarters from the fourth quarter of 2020 through the fourth quarter of 2021.”
On July 27, the SEC wrote to Agrawal that it had completed its review of Twitter’s filings and reminded him that “the company and its management are responsible for the accuracy and adequacy of their disclosures.”
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