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Social media platforms put it on thick

The technology industry has not been pale in inventing its own dubious measurements over the years. But lately, even the basics are unreliable.

Social media investors have historically focused on two key figures: ad dollars and user numbers. Ideally, both would grow hand in hand, but a major pull or sudden reversal of the trend in one or the other can often trigger a major change in the stock price.

Advertising revenue is money, and we must hope that it is not something that can be so easily fudged or forgivably miscalculated. User numbers are another story. All social media companies seem to have their own standard for how they measure their breadth. Reporting of four of them, Meta Platforms FB -2.56%

shares at the same time so much and yet so little. It tells you how many people use its Facebook app and its broader “family” of apps on a daily and monthly basis, respectively. Although its hottest asset these days is Instagram, these specific user numbers remain someone’s best guess.

As recently as 2018, Twitter TWTR -0.18%

told investors that daily active user growth was “the best measure” of its success in driving the use of the platform as a daily tool. But in early 2019, Twitter introduced a new metric, “revenue-generating daily active users,” as it defined the users who could see ads. The new metric is “not comparable to current revelations from other companies,” Twitter said in its shareholder letter in the fourth quarter of 2018, noting that its goal was not to reveal the largest daily active user number it could. It was convenient: At the time, Meta’s Facebook app seemed to have about 10 times the number of daily users that Twitter had.

Snap Inc.’s

SNAP -1.21%

Snapchat reports daily users, but Pinterest PINS -3.21%

do not do. According to its annual application, Pinterest’s growth efforts “are not currently focused on increasing the number of daily active users, and we do not expect most of our users to become daily active users.” You can give them the credit for not trying to be something they are not, but you have to imagine that the daily inventory is pretty unimpressive for the company to open up to perhaps the scariest comparison ever: Like Pinterest, Meta also calculates average turnover per user with monthly user metrics. In the US and Canada, Facebook averaged more than $ 48 per page. monthly spend in the first quarter; Pinterest generated $ 4.98.

In the end, most user metrics are a bit blurry no matter which company chooses. Twitter said Thursday that it actually misjudged its mDAUs for 12 consecutive quarters until the end of last year, giving itself credit for multiple accounts owned by a single user. The difference was not very large: Twitter said it accounted for about 1.9 million fewer daily active users who could make money, in the fourth quarter of 2021, for example, out of a reformulated total of 214.7 million.

Similarly, Meta said in an archive that in the fourth quarter of 2021, about 11% of monthly active users of their Facebook app could be duplicate accounts.

But small changes can go a long way on Wall Street. Pinterest shares flew more than 13% higher on Thursday after the company’s first-quarter report suggested that its monthly active users may be stabilizing. After three consecutive quarters of declines, Pinterest said it added two million monthly active users in the first quarter. Then again, the company also said that its monthly active users per. April 25 was 432.9 million, suggesting a slight drop from its first-quarter reported figure of 433 million. Pinterest declined to say if the difference was due to rounding.

Meta’s shares imploded and lost more than a quarter of their value in one day after the company said its daily active Facebook users fell by a million sequentially in the fourth quarter. But its shares rose more than 17% Thursday after first-quarter earnings, which showed, among other things, that Facebook’s daily active user base was back to sequential growth.

Meta’s latest quarterly archiving opens with a revelation of “limitations of key metrics”, specifically users’. The company talks about inherent challenges in tracking the use of its products, adding that it requires “significant judgment” and is also susceptible to technical errors.

It goes on to note that regular review of its computational processes may result in adjustments to its historical data, which it said it generally does not intend to update as long as the changes fall within its margin of error. While this margin varies by period and category, Facebook told its global family of apps that it could generally be defined as about 3% of its monthly active users. With a base of 3.64 billion in the first quarter, that would equate to about 109 million users. In short, it does not make much sense for the stock to make large movements on quarterly fluctuations of only one million users.

In recent months, tech companies have gone from being speculative winners to potential value games with the social media sector hardly an exception. Shares in Meta, Pinterest and Snap have fallen by an average of 41% this year so far.

The prices can now be quite convincing – unless of course you overestimate the most important fundamental factors.

Write to Laura Forman at laura.forman@wsj.com

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