How Twitter Secretly Benefits From Bots and Fake Accounts

Twitter may have a fake accounts scandal on its hands. And it’s remarkably similar to the scandal that rocked Wells Fargo last year.

Leslie Miley, a former engineering manager at Twitter, described to Bloomberg on Friday how he uncovered a trove of spam accounts with IP addresses from Russia and Ukraine in 2015. He recommended deletion, but Twitter’s “growth team” controlled all removals of accounts. And they declined to purge them. “They were more concerned with growth numbers than fake and compromised accounts,” Miley told Bloomberg.

The only difference between this and the Wells Fargo scandal is the identity of who created the accounts.

Contrary to popular belief, the Wells Fargo scandal was not really about the bank earning money directly from customers enrolled in fake accounts its employees created. Most of the accounts had no money in them. The initial funds Wells Fargo returned to customers who were charged fees on the accounts came out to about $25 per customer, less than the cost of one overdraft fee. That undersells the real impact to those whose credit scores may have been weakened by unwanted accounts, but Wells Fargo didn’t profit from that.

Wells Fargo did benefit when it came to Wall Street, though. Executives repeatedly touted its industry lead in sales growth to investors. They bragged in earnings calls about this. They highlighted the average number of accounts per retail banking customer in annual reports; after getting caught in 2016 they stopped reporting the number, but in 2015 it was over six accounts per customer.

At the same time, managers pressured line-level employees to constantly increase sales figures, leading to the fake account creation. Top executives eventually learned what was happening on the ground to goose the numbers. But they didn’t disclose that to investors until settling with federal regulators. From 2011 to mid-2015, Wells Fargo stock doubled, in large part because of sales growth. So while the company wasn’t making much money off of the bogus accounts, shareholders — including executives whose wealth is tied up in company stock — were making lots of it. The company hid from investors the truth behind this growth, driven by fake accounts.

That’s exactly what this engineer accuses Twitter’s growth team of doing. Twitter has lagged well behind Facebook and other rivals in terms of user growth, with a little over 300 million users compared to Facebook’s 2 billion. According to Miley, the company didn’t want to excise the bots and spam accounts, as doing so would widen that gap even further. Stock prices would tank if monthly active users fell dramatically. Investors looked at that number as the most important metric.

The Bloomberg report cites 10 anonymous former employees reinforcing Miley’s description (Miley is only named because he declined Twitter’s severance package when he left the company, which came with a non-disclosure agreement). They said that Twitter engages in little, if any, verifications for its accounts, which anybody who has created an account can attest to. And Miley claimed that a significant number of dormant accounts had Russian and Ukrainian IP addresses.

When Miley told his manager about the inactive and fake accounts, he was told, “Stay in your lane, that’s not your role.” The growth team, responsible for deleting such accounts, took no action. These accounts roused to life during the 2016 election.

Propaganda and U.S. elections aside, Miley’s story suggests that the team responsible for user growth at Twitter knew about fake accounts and chose not to delete them, because they wanted to preserve higher user numbers for investors — even though the accounts weren’t being used. That’s exactly what Wells Fargo did, and it can be credibly painted as securities fraud, a material misrepresentation of the company’s performance. A Twitter spokesperson, meanwhile, told Bloomberg that it was suspending and taking “other enforcement actions” against Russian and Ukrainian accounts to the tune of “millions per week.”

Now that Congress is involved, Twitter is making a show of purging certain Russian-linked accounts, which they say number over 36,000. Twitter’s general counsel claimed in testimony this week that less than 5 percent of accounts on the platform are fake; independent research puts the number at around 15 percent.

Twitter stock is down after last week’s grilling in Washington.

Top photo: With a display showing President Donald Trump retweeting a fake Russian Twitter account, Sen. Patrick Leahy, D-Vt., questions witnesses during a Senate Judiciary Subcommittee on Crime and Terrorism hearing titled “Extremist Content and Russian Disinformation Online” on Capitol Hill, Oct. 31, 2017 in Washington, D.C.