Please ensure Javascript is enabled for purposes of website accessibility

Twitter Still Refuses to Disclose Daily Active Users

By Evan Niu, CFA - Jul 27, 2017 at 6:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What is Twitter hiding? Poor engagement metrics.

Stop me if you've heard this one before: Shares of Twitter (TWTR 0.73%) tank amid poor user figures.

That familiar story line has easily been the single most concerning theme for investors during Twitter's life as a public company. Shareholders were optimistic last quarter, when the microblogging service put up its best user growth in years, adding 9 million monthly active users (MAUs) sequentially in the first quarter. It turns out last quarter was the exception to the rule.

Different social media apps on a phone

Image source: Pixabay.

The cover-up

MAUs were flat at 328 million in the second quarter, while daily active users (DAUs) increased year over year by a seemingly impressive 12%. However, the company still refuses to disclose DAUs on an absolute basis, which just undermines the legitimate gains that Twitter is making with engagement. In fact, the lack of DAU disclosure only makes this comment from COO and CFO Anthony Noto all the more absurd (emphasis added):

Obviously, our focus has been on daily active usage. We believe we have content that's relevant everywhere in the world and it's relevant every day. And so we have elevated the importance of daily active users, the key driver of overall growth, both from an audience standpoint, engagement standpoint and also, from an advertising standpoint.

So Twitter has "elevated the importance" of highlighting DAUs as a growth driver, but still won't share how many there actually are? That makes no sense.

Twitter also attributed some of the weakness in the business to seasonal factors, yet was unable to provide detail on what these seasonal factors were when pressed by BTIG analyst Rich Greenfield. After initially blaming seasonality, Noto confessed that Twitter doesn't even know why MAUs were flat:

We don't have data that will explain the causal impact to that why the top of the funnel for U.S. MAU decreased. So it could be related to any number of exogenous factors, including fewer events, lower seasonal benefits, or organic trends. And so as we've dug into it, that's the conclusion that we've been able to draw based on the data and the analysis.

Investors can only guess as to the DAU/MAU ratio, an important metric for engagement. Noto provided some clues, responding to Greenfield again (emphasis added):

You asked the question of where we are in DAUs versus MAUs, and we have provided a perspective back in 2014 and yes, specifically about less than 50%. What I'd say is our DAU/MAU ratio, regardless of how you measure it, hasn't changed meaningfully or substantially one way or the other over the last couple of years. So there's still a significant amount of headroom for us to drive DAU growth without MAU growth.

I'm not sure how you can be specific, approximate, and less than, all at the same time, but OK. Using "specifically about less than 50%" implies "about less than" 164 million DAUs, which is comparable to Snap, which had 166 million DAUs as of last quarter. (Fun fact: While Twitter won't disclose DAUs, Snap won't disclose MAUs.)

The thing is that having anywhere from 150 million to 160 million DAUs is not that embarrassing in itself, even if the DAU/MAU engagement ratio is less than 50%. Investors are more concerned about the sheer fact that Twitter won't disclose DAUs, which suggests that it is hiding something. It's not the crime, it's the cover-up.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
$44.26 (0.73%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.