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For social-media companies such as Facebook (FB +1.97%), Twitter (TWTR +0.00%), LinkedIn (LNKD +0.00%), and more, monthly active users (MAUs) are the lifeblood that powers their billion-dollar business models. With each earnings release, investors watch how many active users each social-media company reports, as both the total number of MAUs and the growth rate impact a social-media company's stock price.
In that regard, Facebook towers over Twitter and LinkedIn today.
|
Company |
Monthly Active Users (MAUs) |
|---|---|
|
|
1.79 billion |
|
|
317 million |
|
|
106 million |
Data sources: Facebook, Twitter, and LinkedIn investor relations.
Let's review the various user metrics that social-media companies Facebook, Twitter, and LinkedIn provide and how investors should think about these important business metrics.
Social-media user numbers: an inexact science
Facebook, Twitter, and LinkedIn each provide a different set of audience statistics, which can make comparing one to another somewhat challenging. For example, in addition to the MAU figure in the preceding chart, Facebook also reports daily active users (DAUs) of 1.18 billion, mobile DAUs of 1.09 billion, and mobile MAUs of 1.66 billion. Twitter, on the other hand, discloses only the MAU figure in the chart and its DAU growth rate (7%), but not aggregate DAUs. LinkedIn discloses its total registered users (467 million) and its MAU figure, but not much else.
Making matters more complex still, these companies define what constitutes an "active" user differently. For example, a user must log in and use Facebook at least once a month to qualify as a monthly active user in its financial reports, whereas for Twitter, an account must simply follow 30 other Twitter accounts and must also be followed by one-third of the accounts it follows to qualify as an active user.
The point of all of this is that the ways in which social-media companies such as Facebook, Twitter, and LinkedIn define and report their user statistics is up to the companies themselves. As such, investors need to make the extra effort to understand what the user information they're looking at means, since gaining a true apples-to-apples comparison is challenge
Monthly active users don't tell the whole story
Understanding the number of users that access a social-media platform only tells one part of the story. It's equally important, if not more so, to understand how much money each service can derive from each user.
To do so, investors leverage an important statistic known as average revenue per user (ARPU). The figure varies wildly among Facebook, Twitter, and LinkedIn:
| Metric |
|
|
|
|---|---|---|---|
|
Most recent quarter's sales |
$7.01 billion |
$616 million |
$960 million |
|
Monthly active users (MAUs) |
1.79 billion |
317 million |
106 million |
|
Average revenue per user (ARPU) |
$3.92 |
$1.94 |
$9.05 |
Data sources: Facebook, Twitter, and LinkedIn investor relations.
Despite the aforementioned noise in user metrics, we can start to get a sense of each social media platform's ability to monetize its user base, a critical driver of long-term financial success.
In the above chart the power of LinkedIn's wonderful three-pronged business model shines through. Though its sale to Microsoft is set to close by the end of this year, LinkedIn's ability to monetize its service is impressive. They do this on the consumer side through premium subscriptions, the HR side through premium services for recruiters, and the corporate side through advertisements. This strategy makes the company a solid bet to mature into a hugely profitable enterprise, a boon for Microsoft investors.
Turning to Facebook, the world's largest social network's mix of moderate ARPU and massive user scale has been an incredibly profitable formula, especially as the effects of operating leverage continue to fuel outsize profit growth. Case in point: Facebook's recent Q3 earnings report saw its sales rise 59% year over year, while net income surged 166% over a year prior.
Finally, we turn to Twitter. The microblogging pioneer's recent struggles are on full display in the numbers we've seen. Because of the dearth of product innovation in recent years, Twitter has been unable to attract large numbers of new users. What's more, even as it has improved its ARPU in recent quarters, Twitter's relatively singular focus on microblogging hasn't expanded its advertising opportunities much.
The takeaway
I hope I've helped show that understanding social-media businesses is an inexact science. Variations in user metrics can make it difficult to compare social-media companies to one another. However, since their business models tie to their revenue-generation efforts, understanding the trends in monthly active users is worth the time and effort.
