Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 1 of 32
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`LATHAM & WATKINS LLP
`Michele D. Johnson (Bar No. 198298)
` michele.johnson@lw.com
`650 Town Center Drive, 20th Floor
`Costa Mesa, California 92626-1925
`Telephone: +1.714.540.1235
`Facsimile: +1.714.755.8290
`
`Elizabeth L. Deeley (Bar No. 230798)
`elizabeth.deeley@lw.com
`505 Montgomery Street, Suite 2000
`San Francisco, California 94111-6538
`Telephone: +1.415.391.0600
`Facsimile: +1.415.395.8095
`
`Hilary H. Mattis (Bar No. 271498)
` hilary.mattis@lw.com
`140 Scott Drive
`Menlo Park, CA 94025-1008
`Telephone: +1.650.328.4600
`Facsimile: +1.650.463.2600
`
`Andrew B. Clubok (pro hac vice)
`Susan E. Engel (pro hac vice)
` andrew.clubok@lw.com
` susan.engel@lw.com
`555 Eleventh Street, N.W., Suite 1000
`Washington, D.C. 20004-1304
`Telephone: +1.202.637.2200
`Facsimile: +1.202.637.2201
`
`Attorneys for Defendants Twitter, Inc.,
`Jack Dorsey and Ned Segal
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`OAKLAND DIVISION
`
` IN RE TWITTER, INC. SECURITIES
`LITIGATION
`
`___________________________________
`
`
`This Document Relates To:
`
`
` ALL ACTIONS
`
`
`
` Case No.: 4:19-cv-07149-YGR
`
`DEFENDANTS’ NOTICE OF MOTION AND
`MOTION TO DISMISS THE
`CONSOLIDATED CLASS ACTION
`COMPLAINT; MEMORANDUM OF
`POINTS AND AUTHORITIES IN SUPPORT
`THEREOF
`
`Date: October 13, 2020
`Time: 2:00 p.m.
`Courtroom: 1
`Hon: Yvonne Gonzalez Rogers
`
`
`
`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 2 of 32
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`NOTICE OF MOTION AND MOTION
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`TO PLAINTIFFS AND TO THEIR ATTORNEYS OF RECORD:
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`PLEASE TAKE NOTICE that on October 13, 2020, at 2:00 p.m., in Courtroom 1 of the
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`United States District Court for the Northern District of California, located at 1301 Clay Street,
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`Oakland, California, Defendants Twitter, Inc. (“Twitter” or the “Company”), Jack Dorsey and
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`Ned Segal (together, the “Individual Defendants” and with Twitter, “Defendants”) will and
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`hereby do move for an order dismissing Plaintiffs’ Consolidated Class Action Complaint, Dkt.
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`50 (“CAC” or “Complaint”) on the ground that it fails to state a claim under Federal Rules of
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`Civil Procedure 9(b) and 12(b)(6) and the Private Securities Litigation Reform Act of 1995, Pub.
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`L. 104-67, 109 Stat. 737 (“PSLRA”). This motion is based on the Memorandum of Points and
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`Authorities, the Declaration of Susan E. Engel in Support of the Motion to Dismiss the
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`Consolidated Class Action Complaint (“Engel Decl.”) and attached exhibits, the Request for
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`Judicial Notice in Support of the Motion to Dismiss the Consolidated Class Action Complaint
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`(“Request for Judicial Notice”), and all other matters properly before the Court.
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`Twitter seeks an order pursuant to Federal Rule of Civil Procedure 12(b)(6) dismissing
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`with prejudice Plaintiffs’ claims for failure to state a claim upon which relief can be granted.
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`STATEMENT OF ISSUES
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`
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`Whether the Complaint fails to state a claim under Section 10(b) and Section 20(a) of the
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`Securities Exchange Act of 1943 (“Exchange Act”), 15 U.S.C. § 78j(b).
`
`
`
`DATED: June 12, 2020
`
`
`
` LATHAM & WATKINS LLP
`
`/s/ Michele D. Johnson
`Michele D. Johnson (Bar No. 198298)
` michele.johnson@lw.com
`650 Town Center Drive, 20th Floor
`Costa Mesa, California 92626-1925
`Telephone: +1.714.540.1235
`Facsimile: +1.714.755.8290
`
`Elizabeth L. Deeley (Bar No. 230798)
` elizabeth.deeley@lw.com
`505 Montgomery Street, Suite 2000
`San Francisco, California 94111-6538
`Telephone: +1.415.391.0600
`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 3 of 32
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`Facsimile: +1.415.395.8095
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`Hilary H. Mattis (Bar No. 271498)
` hilary.mattis@lw.com
`140 Scott Drive
`Menlo Park, CA 94025-1008
`Telephone: +1.650.328.4600
`Facsimile: +1.650.463.2600
`
`Andrew B. Clubok (pro hac vice)
`Susan E. Engel (pro hac vice)
` andrew.clubok@lw.com
` susan.engel@lw.com
`555 Eleventh Street, N.W., Suite 1000
`Washington, D.C. 20004-1304
`Telephone: +1.202.637.2200
`Facsimile: +1.202.637.2201
`
`Attorneys for Defendants Twitter, Inc.,
`Jack Dorsey and Ned Segal
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`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 4 of 32
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`
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`TABLE OF CONTENTS
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`Page
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`I.
`
`II.
`
`III.
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`IV.
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`INTRODUCTION ............................................................................................................. 1
`
`BACKGROUND ............................................................................................................... 3
`
`A.
`
`B.
`
`C.
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`Twitter’s Advertising Business and MAP Product ................................................ 3
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`Twitter Discovers, Discloses, and Fixes MAP Privacy Bugs ................................ 5
`
`Twitter Announces Q3 Revenue Within Guidance and Discloses
`Additional Information About the Effect of Fixing MAP Privacy
`Bugs ....................................................................................................................... 5
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`LEGAL STANDARD ........................................................................................................ 6
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`ARGUMENT ..................................................................................................................... 6
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`A.
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`Plaintiffs Do Not Plead a Material Misrepresentation or Omission ...................... 7
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`1.
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`2.
`
`3.
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`Statements 1-4: Q2 Shareholder Letter & Quarterly Report .................... 7
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`Statement 5: August 6, 2019 Tweet ........................................................ 11
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`Statements 6-7: September 4, 2019 Citi Global
`Technology Conference ........................................................................... 12
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`B.
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`The Complaint Fails to Allege a Strong Inference of Scienter ............................ 15
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`1.
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`2.
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`3.
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`4.
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`Monitoring of Key Metrics ...................................................................... 16
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`Prominence of MAP Product and Impact on Multiple
`Products.................................................................................................... 18
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`Alleged Privacy Violations ...................................................................... 20
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`Considered Holistically, the More Plausible Inference is
`Nonculpable ............................................................................................. 20
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`C.
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`D.
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`The Complaint Fails to Allege With Particularity Loss Causation...................... 22
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`The Complaint Fails to State a Claim Under Section 20(a)................................. 23
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`CONCLUSION ................................................................................................................ 23
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`V.
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 5 of 32
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`
`
`TABLE OF AUTHORITIES
`
`CASES
`
`
`
`
`
`Page(s)
`
`In re Accuray, Inc. Sec. Litig.,
`757 F. Supp. 2d 936 (N.D. Cal. 2010) .....................................................................................19
`
`In re Apple Inc. Sec. Litig.,
`No. 19-CV-02033-YGR, 2020 WL 2857397 (N.D. Cal. June 2, 2020) ..................................18
`
`In re Atossa Genetics, Inc. Sec. Litig.,
`868 F.3d 784 (9th Cir. 2017) .....................................................................................................6
`
`Basic Inc. v. Levinson,
`485 U.S. 224 (1988) .................................................................................................................14
`
`Berson v. Applied Signal Tech., Inc.,
`527 F.3d 982 (9th Cir. 2008) ...................................................................................................18
`
`Bodri v. GoPro, Inc.,
`252 F. Supp. 3d 912 (N.D. Cal. 2017) .....................................................................................21
`
`Brody v. Transitional Hosp. Corp.,
`280 F.3d 997 (9th Cir. 2002) ...................................................................................................12
`
`Cement Masons & Plasterers Joint Pension Tr. v. Equinix, Inc.,
`No. 11-01016 SC, 2012 WL 685344 (N.D. Cal. Mar. 2, 2012)...............................................21
`
`City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.,
`856 F.3d 605 (9th Cir. 2017) .....................................................................................................7
`
`City of Royal Oak Ret. Sys. v. Juniper Networks, Inc.,
`880 F. Supp. 2d 1045 (N.D. Cal. 2012) ...................................................................................21
`
`City of Sunrise Fire Pension Fund v. Oracle Corp.,
`No. 18-CV-04844-BLF, 2019 WL 6877195 (N.D. Cal. Dec. 17, 2019) .................................14
`
`Colyer v. Acelrx Pharm., Inc.,
`No. 14-CV-04416-LHK, 2015 WL 7566809 (N.D. Cal. Nov. 25, 2015) ................................12
`
`Cooper v. Pickett,
`137 F.3d 616 (9th Cir. 1997) .....................................................................................................7
`
`In re Daou Sys., Inc. Sec. Litig,
`411 F.3d 1006 (9th Cir. 2005) .................................................................................................15
`
`In re Dynavax Sec. Litig.,
`No. 4:16-CV-06690-YGR, 2018 WL 2554472 (N.D. Cal. June 4, 2018) ...........................8, 11
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
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`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 6 of 32
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`
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`Eminence Cap., LLC v. Aspeon, Inc.,
`316 F.3d 1048 (9th Cir. 2003) .................................................................................................15
`
`In re Facebook, Inc. Sec. Litig.,
`405 F. Supp. 3d 809 (N.D. Cal. 2019) ............................................................................. passim
`
`In re Fusion-io, Inc. Sec. Litig.,
`No. 13-CV-05368-LHK, 2015 WL 661869 (N.D. Cal. Feb. 12, 2015) ...................................19
`
`Glazer Capital Mgmt., LP v. Magistri,
`549 F.3d 736 (9th Cir. 2008) ...................................................................................................16
`
`In re Intel Corp. Sec. Litig.,
`No. 19-cv-00507-YGR, 2019 WL 1427660 (N.D. Cal. Mar. 29, 2019)..................................14
`
`Irving Firemen’s Relief & Ret. Fund v. Uber Techs.,
`No. 17-CV-05558-HSG, 2018 WL 4181954 (N.D. Cal. Aug. 31, 2018) ..........................12, 14
`
`Jui-Yang Hong v. Extreme Networks, Inc.,
`No. 15-cv-04883-BLF, 2017 WL 1508991 (N.D. Cal. Apr. 27, 2017) ...................................14
`
`Kim v. Advanced Micro Devices, Inc.,
`No. 5:18-CV-00321-EJD, 2019 WL 2232545 (N.D. Cal. May 23, 2019)...............................10
`
`Kovtun v. VIVUS, Inc.,
`No. C 10-4957 PJH, 2012 WL 4477647 (N.D. Cal. Sept. 27, 2012) .......................................22
`
`Lipton v. Pathogenesis Corp.,
`284 F.3d 1027 (9th Cir. 2002) .....................................................................................13, 18, 23
`
`Loos v. Immersion Corp.,
`762 F.3d 880 (9th Cir. 2014) ...................................................................................................22
`
`M & M Hart Living Tr. v. Glob. Eagle Entm’t, Inc.,
`No. CV 17-1479 PA, 2017 WL 5635424 (C.D. Cal. Aug. 20, 2017) ......................................14
`
`McGovney v. Aerohive Networks, Inc.,
`367 F. Supp. 3d 1038 (N.D. Cal. 2019) ...................................................................................12
`
`McGovney v. Aerohive Networks, Inc.,
`No. 18-CV-00435-LHK, 2019 WL 8137143 (N.D. Cal. Aug. 7, 2019) ..................................20
`
`Metzler Inv. GMBH v. Corinthian Colleges, Inc.,
`540 F.3d 1049 (9th Cir. 2008) .................................................................................................22
`
`Nguyen v. Endologix, Inc.,
`--F. 3d --, No. 18-56322, 2020 WL 306977 (9th Cir. June 10, 2020) .........................15, 16, 17
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 7 of 32
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`No. 84 Emp’r–Teamster Joint Council Pension Trust Fund v. Am. W. Holding
`Corp.,
`320 F.3d 920 (9th Cir. 2003) .....................................................................................................9
`
`Norfolk Cty. Ret. Sys. v. Solazyme, Inc.,
`No. 15-CV-02938-HSG, 2016 WL 7475555 (N.D. Cal. Dec. 29, 2016) ..................................8
`
`In re OmniVision Techs., Inc. Sec. Litig.,
`937 F. Supp. 2d 1090 (N.D. Cal. 2013) ...................................................................................12
`
`Oregon Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,
`774 F.3d 598 (9th Cir. 2014) ...............................................................................................6, 15
`
`Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc.,
`759 F.3d 1051 (9th Cir. 2014) .......................................................................................9, 18, 20
`
`Reese v. Malone,
`747 F.3d 557 (9th Cir. 2014) .....................................................................................................6
`
`In re Rigel Pharm., Inc. Sec. Litig.,
`697 F.3d 869 (9th Cir. 2012) ...............................................................................................8, 20
`
`Rodriguez v. Gigamon Inc.,
`325 F. Supp. 3d 1041 (N.D. Cal. 2018) ...................................................................................22
`
`Ronconi v. Larkin,
`253 F.3d 423 (9th Cir. 2001) .....................................................................................................7
`
`Sanchez v. IXYS Corp.,
`No. 17-cv-06441-WHO, 2018 WL 4787070 (N.D. Cal. Oct. 2, 2018) ...................................12
`
`Shenwick v. Twitter, Inc.,
`282 F. Supp. 3d 1115 (N.D. Cal. 2017) ...................................................................................21
`
`In re Silicon Graphics Inc. Sec. Litig.,
`183 F.3d 970 (9th Cir. 1999) ...................................................................................................13
`
`In re Silicon Image, Inc. Sec. Litig.,
`No. C-05-456 MMC, 2007 WL 607804 (N.D. Cal. Feb. 23, 2007) ........................................10
`
`Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
`551 U.S. 308 (2007) .................................................................................................................15
`
`Tietsworth v. Sears, Roebuck & Co.,
`720 F. Supp. 2d 1123 (N.D. Cal. 2010) .....................................................................................6
`
`Veal v. LendingClub Corp.,
`423 F. Supp. 3d 785 (N.D. Cal. 2019) ...........................................................................8, 11, 19
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Vess v. Ciba-Geigy Corp.,
`317 F.3d 1097 (9th Cir. 2003) ...................................................................................................7
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`Wanca v. Super Micro Comp., Inc.,
`No. 5:15-cv-04049-EJD, 2018 WL 3145649 (N.D. Cal. Jun. 27, 2018) .................................11
`
`Xiaojiao Lu v. Align Tech., Inc.,
`417 F. Supp. 3d 1266 (N.D. Cal. 2019) .....................................................................................9
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`Zucco Partners, LLC v. Digimarc Corp.,
`552 F.3d 981 (9th Cir. 2009) ........................................................................................... passim
`
`STATUTES
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`15 U.S.C.
`§ 78u-4(b)(1)(B).........................................................................................................................7
`§ 78u-4(b)(2) ............................................................................................................................15
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`RULES
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`Fed. R. Civ. P. 9(b) ............................................................................................................3, 6, 7, 13
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`REGULATIONS
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`17 C.F.R.
`§ 240.10b-5 ................................................................................................................................6
`§ 240.10b5-1 ......................................................................................................................21, 22
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 9 of 32
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`MEMORANDUM OF POINTS AND AUTHORITIES
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`I.
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`INTRODUCTION
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`Consistent with its commitment to transparency, Twitter disclosed to users on August 6,
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`2019, that software bugs had inadvertently caused it to share certain user data through one of its
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`advertising products, Mobile Application Promotion (“MAP”), even when users had not given
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`permission to do so, and that Twitter had promptly corrected the issue. From this laudable effort
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`to be transparent with users about a privacy correction, Plaintiffs have spun claims of securities
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`fraud. They conclude, without factual support, that Twitter failed to disclose a material revenue
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`impact from Twitter’s remediation of the software bugs. But nothing in the Complaint comes
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`close to suggesting that Twitter, its CEO Jack Dorsey, or its CFO Ned Segal knew at the time
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`Twitter disclosed the software bugs that advertiser demand for the MAP product would decline
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`in a way that materially impacted third quarter revenues and hid that information from the
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`market. In fact, Twitter had already warned investors through its risk factor disclosures that
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`software bugs could result in a loss of advertising revenue. At the end of the third quarter,
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`Twitter disclosed that the remediation of the software bugs had resulted in a three percent impact
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`on third quarter (Q3) revenue growth (even though revenues still fell within the market guidance
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`Twitter had previously provided). Plaintiffs point to no facts attributing the resulting stock drop
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`to fraud—as opposed to analysts’ and investors’ disappointment with the Company’s technical
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`shortcomings in delivering advertising. The Complaint should be dismissed with prejudice for
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`several, independent reasons.
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`First, Plaintiffs do not plead facts that would make any of the challenged seven
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`statements materially false or misleading. Plaintiffs speculate that by “no later than” July 26,
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`2019 (the beginning of the proposed class period), Twitter had already discovered the MAP-
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`related bugs and somehow knew that its corrective action would materially affect Twitter’s
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`revenue. CAC ¶ 103. But there is not a single factual allegation suggesting that Twitter knew of
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`the MAP-related bugs on July 26, 2019, or at the time of its second quarter (“Q2”) filings. And
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`Plaintiffs’ allegation that by that date advertisers had already reduced spending in response to a
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`fix that would occur and be announced nearly two weeks later defies common sense. At any
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 10 of 32
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`rate, Twitter did not purport to speculate in its disclosure to users about a possible revenue
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`impact, and it had no obligation to do so. In fact, Twitter had already warned investors in its Q2
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`filings of exactly such a risk from software bugs. Given these deficiencies, Plaintiffs are left
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`with Defendant Segal’s statements made a month later at an investor conference, that Twitter’s
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`work to improve the MAP product was “ongoing” and that the Asia market had historically been
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`more MAP-focused than the United States. Id. ¶¶ 115, 118. But the purportedly omitted
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`revenue facts are not inconsistent with either of Mr. Segal’s statements, which did not suggest to
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`investors anything at all about MAP revenue or Q3 revenue. Nor are there any specific facts to
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`support an allegation that MAP revenue had materially declined by the September 4 conference
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`(or even by the end of Q3).
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`Second, Plaintiffs’ allegations fall far short of the stringent scienter pleading
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`requirements. Plaintiffs plead no plausible facts that Defendants made any alleged
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`misstatements intentionally or with deliberate recklessness. Plaintiffs do not allege any unusual
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`or suspicious sales by either Individual Defendant, and the Complaint lacks any confidential
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`witness allegations remotely suggesting that Defendants had any contemporaneous information
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`that rendered their statements false or misleading. The only allegations as to the Individual
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`Defendants are that they received daily emails containing summaries of alleged “Key Metrics,”
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`including Cost Per Ad Engagement (“CPE”). Id. ¶¶ 13, 125. But Plaintiffs’ allegations are
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`based on stale discovery responses about emails sent in 2015 (not in 2019)—and are based on a
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`metric that did not provide any information specific to MAP, which is just one of Twitter’s many
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`advertising products. Plaintiffs do not explain how any change in the overall CPE metric could
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`measure a change in Twitter’s MAP revenues, rather than measuring, as disclosed in Twitter’s
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`SEC filings, changes in demand for all of Twitter’s various pay-for-performance advertising
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`products. Plaintiffs’ allegations about the “prominence” of the MAP product do not help them.
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`It is not “absurd” that Defendants would not know about an unspecified decline in one product
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`among many, and there are no allegations that Individual Defendants knew of a specific metric
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`measuring MAP revenue alone during the third quarter. In any event, none of these allegations
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`(considered alone or together) meets the specificity requirements imposed by the PSLRA and
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 11 of 32
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`Rule 9(b) to establish that the Defendants made the challenged statements with the requisite state
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`of mind.
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`Third, the Complaint does not adequately plead loss causation. Plaintiffs point to a
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`single price drop on October 24, 2019, following the announcement of Q3 revenue results. But
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`they fail to allege that the price decline on that day was caused by the revelation of fraudulent
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`activity; instead, Plaintiffs cite analyst reports reflecting that the drop was due to investors’
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`expectations that “the company’s ad delivery technology will perform flawlessly [and] Twitter’s
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`Q3 revenue shortfall is evidence that its technology did not work properly.” Id. ¶ 122.
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`Technology bugs are not securities fraud, and courts in this Circuit are clear that the
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`announcement of disappointing results, alone, does not establish loss causation.
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`II.
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`BACKGROUND
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`A.
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`Twitter’s Advertising Business and MAP Product
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`Twitter is a “global platform for public self-expression and conversation in real time.”
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`Id. ¶ 39. Twitter’s users can access the service via twitter.com and on mobile devices through
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`mobile applications. Id. Users can access real-time information about a wide array of news and
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`events, and can share information and content (Tweet), interact with content, or express their
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`reactions to other Twitter users. Id. Twitter’s users do not have to pay a fee to use the service;
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`instead, Twitter sells advertising on its platform to advertisers who want to reach its users.
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`Twitter generates a significant portion of its revenue from advertising. See id. ¶ 43 (citing Ex. 1
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`(10-K)).1
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`Twitter sells multiple different advertising products that fall into three broad categories:
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`Promoted Tweets, Promoted Accounts, and Promoted Trends. Ex. 1 (10-K) at 8. Promoted
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`Tweets are ads that “appear within a user’s timeline, search results or profile pages just like an
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`ordinary Tweet,” (id.; see also CAC ¶ 56), and advertisers pay for them through an auction based
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`on either the impressions delivered (e.g., the number of times an advertiser’s ad is seen) or only
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`when users take certain actions (e.g., liking a Tweet, clicking on a website link, installing an app,
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`1 References to “Ex.” are to the exhibits attached to the Declaration of Susan E. Engel (“Engel
`Decl.”) filed herewith.
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`3
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 12 of 32
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`or watching a video), i.e., “pay-for-performance.” Ex. 1 (10-K) at 8, 54, 58. Promoted Accounts
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`can also be pay-for-performance priced through an auction; Promoted Trends are a fixed fee. Id.
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`at 58, 69.
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`Twitter’s MAP product is a type of Promoted Tweet. It provides a direct link to install or
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`open mobile applications (for example, a music or video game app) on the user’s smartphone.
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`CAC ¶ 56. MAP ads specifically prompt users to download an advertiser’s mobile app, or
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`reengage with a mobile app the user has already downloaded. Id. ¶ 8. For MAP, pay-for-
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`performance means Twitter charges advertisers for each click on the “install” or “open” buttons
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`in the ad. Id. ¶ 59. Twitter tracks various metrics for MAP, including install and open attempts
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`and various conversion events and engagements, (id. ¶ 60), but Plaintiffs do not allege that any
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`of these MAP-specific metrics are Key Metrics, and they are not (see Ex. 1 (10-K) at 54; CAC ¶
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`46).
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`Rather, Plaintiffs tout throughout the Complaint (e.g., CAC ¶¶ 46, 124) a CPE metric that
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`they do not allege breaks out MAP charges or is otherwise specific to the MAP product. Instead,
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`as Twitter describes in its securities filings and Plaintiffs do not dispute, the CPE metric tracks
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`cost per ad engagement, and ad engagement is defined as a user interaction with any one of
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`Twitter’s pay-for-performance advertising products. See Ex. 1 (10-K) at 54. MAP pay-for-
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`performance charges (i.e., “downloading or engaging with a promoted mobile application”) are
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`just one of many types of ad engagements that factor into the overall CPE metric. See id. As
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`Plaintiffs recognize, therefore, changes in the CPE metric are a measure of demand for all of
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`Twitter’s pay-for-performance advertising products, not just MAP. See id.; CAC ¶ 46. For
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`example, Twitter explained in its 2018 10-K that it believed a decrease in the CPE metric
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`showed that advertisers were getting the same amount of user engagement (more users were
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`clicking on relevant ads) at a lower price, including by shifting to video ads. See Ex. 1 (10-K) at
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`54.
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`MAP was first launched in April 2014. CAC ¶ 56. Contrary to Plaintiffs’ unsupported
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`allegation that Defendants promised “an improved version of MAP in 2019” (id. ¶ 9),
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`Defendants have never set a specific deadline for a new MAP product. Rather, Mr. Segal and
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 13 of 32
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`Mr. Dorsey repeatedly stated that Twitter was “continuing to improve” its MAP product, and that
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`ongoing work to improve the MAP product “will take place over multiple quarters.” Id.; see also
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`Ex. 5 (Q2 2019 Shareholder Letter, cited at CAC ¶ 104) at 11 (disclosing that “multiquarter
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`efforts” to improve the MAP product were “continuing”).
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`B.
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`Twitter Discovers, Discloses, and Fixes MAP Privacy Bugs
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`As Twitter has emphasized to its users, “[p]rotecting and defending user privacy is at the
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`heart of our work. From protecting user anonymity, to offering meaningful privacy and security
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`controls, and our overall commitment to transparency, these are foundational principles and built
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`into the core DNA of our company.” CAC ¶ 142. Consistent with these principles, Twitter’s
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`Privacy Policy sets out to ensure that every user irrespective of their location can simply
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`understand and control the data Twitter collects about them, how it is used, and when it is shared.
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`Id. ¶ 68 (citing Twitter Privacy Policy). To that end, Twitter allows users to opt-out from
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`sharing various personal data and user preferences. Id. ¶ 141.
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`Consistent with its commitment to privacy and transparency, on August 6, 2019, Twitter
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`Tweeted about the MAP-related bugs, linking to a post on its Help Center website titled, “An
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`issue with your settings choices related to ads on Twitter.” Id. ¶ 79; see also Ex. 2 (August 6,
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`2019 Tweet). In that post, Twitter disclosed to its users that it had “recently found issues where
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`your settings choices may not have worked as intended.” Ex. 3 (Help Center). Twitter explained
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`that it had shared with advertising partners certain data (such as whether a user had engaged with
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`an ad) and had made inferences about the devices users used, even where users had not given
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`Twitter permission to do so. Id. Twitter disclosed that “[w]e fixed these issues on August 5,
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`2019,” and apologized to its users: “You trust us to follow your choices and we failed here.
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`We’re sorry this happened, and we are taking steps to make sure we don’t make this mistake
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`again.” Id.
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`C.
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`Twitter Announces Q3 Revenue Within Guidance and Discloses Additional
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`Information About the Effect of Fixing MAP Privacy Bugs
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`On October 23, 2019, Twitter announced its financial results for the third quarter ended
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`September 30, 2019. CAC ¶ 89. Twitter announced Q3 revenue of $824 million, up nine
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`DEFENDANTS’ NOT. OF MOT. AND MOT. TO
`DISMISS CONS. CLASS ACTION COMPLAINT
`Case No.: 4:19-cv-07149-YGR
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`Case 4:19-cv-07149-YGR Document 53 Filed 06/12/20 Page 14 of 32
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`percent year-over-year (see Ex. 4 (Q3 Form 10-Q, cited at CAC ¶ 98) at 7), and within the
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`guidance that Twitter had previously provided in late July. See Ex. 5 (Q2 2019 Shareholder
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`Letter, cited at CAC ¶ 104) at 11 (providing total revenue guidance for Q3 of $815 million to
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`$875 million). In Twitte