According to documents posted to the SEC website and originally reported last week, the Securities and Exchange Commission earlier this summer investigated Twitter about its estimations of monetizable daily active users (mDAU) and fraudulent and spam accounts.
The revelation of the correspondence comes at a time when Twitter is under increased scrutiny for its viewership measures due to its legal dispute with Elon Musk and a whistleblower revelation last week that questioned the company’s incentives to accurately track spam and fake bot accounts.
The government inquired about the company’s claim in its 2021 annual report that fraudulent and spam accounts contribute up less than 5% of mDAU, the metric Twitter uses openly to estimate the size of its userbase, in a letter sent to CEO Parag Agrawal on June 15. The SEC wrote in the letter, “Please provide the methodology used in calculating these figures and the underlying judgments and assumptions used by management.” The Securities and Exchange Commission (SEC) has asked Twitter to explain how the company discovered an error that caused it to overstate mDAU by millions of users. It also asked about Twitter’s restatement of its figures for the previous three years in its March 2022 quarterly report.
Twitter’s overstatement of mDAU was a result of a feature that allowed people to easily switch between accounts. The company said the overstatement had no impact on any of its other key metrics or its financial statements. It determined there was not a material weakness in its internal control over financial reporting.
“We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures,” the SEC said in a letter to Twitter.
Musk has accused Twitter of misrepresenting the prevalence of spam and fake bot accounts on its platform. The case between Musk and Twitter is set to go to trial in October.