In its quarter two earnings report, published Thursday, Twitter reported a flatline in Monthly Active Users (MAUs), despite a 12% year-over-year increase in Daily Active Users (DAUs), according to Kurt Wagner of recode.net. Wall Street expected a four percent jump in MAUs after Twitter added 9 million in quarter one. As of 3:45 Eastern, the company’s stock has fallen 14.26% on the news since the market opened Thursday.
Twitter added 47 million MAUs in 2014, an average of 11.75 million per quarter. In the two and a half years since, the social media icon has gained just 40 million MAUs—4 million per quarter on average. This most recent quarter marks the first flatline the company has ever recorded in the metric, and the worst MAU growth rate since quarter four of 2015 when Twitter lost 2 million MAUs.
Of course, as a company like Twitter establishes itself as a force in the social media sphere, MAUs are expected to level off: it is hard to add users when everybody and their brother already uses a service.
Therefore, many account-based internet services such as Twitter who have traditionally used the monthly active user metric to measure their popularity have begun to favor DAUs to MAUs as indicators of success. DAU growth generally indicates that consumers are becoming increasingly engrossed in a given service. If an MAU becomes a DAU, he/she has gone from using a service casually to integrating it into his/her daily routine.
“Our focus has been on daily active usage,” Anthony Noto, Twitter’s COO, said on the earnings call. “We believe we have content that’s relevant to everyone in the world and it’s relevant every day.”
Despite the shift in focus, Twitter, unlike, for instance, Facebook, does not report its gross number of DAUs. Based on DAU-MAU ratios, though, which the company has periodically released, Wagner estimates that approximately 157 million people use Twitter daily. By comparison, Snapchat has 166 million DAUs. Facebook reported an astronomical 1.32 billion, almost 8.5 times as many as Twitter.
Twitter’s DAU number has grown by more than ten percent year over year over the last three-quarters, by comparison, Facebook’s DAU has grown by an average of just under 4% per quarter in the same timeframe. Snap, which went public in March, reported 5% DAU growth quarter-over-qu in quarter one of 2017; it will release its quarter two report on August 10.
Twitter said on Thursday it is on track to deliver double digit DAU growth again in quarter three.
Investors in social media stocks are generally far more concerned with user growth than revenue reports. Nobody hardly seems to care that Twitter reported a 4.67% revenue increase quarter-over quarter in this most recent quarter. Conversely, when the company reported its largest MAU spike in years in quarter 1, investors were content to overlook a 7.8% dip year-over-year.
Granted, the year-over-year revenue numbers tell a different story. Twitter’s revenue in this most recent quarter fell by 4.67% as compared with quarter two of 2016. It seems an increase in DAUs should correspond to an increase in advertising revenue, but that was not the case in quarter two, in which advertising revenue fell 8%, from $583 million to $489 million.
Facebook and Youtube are leading the industry by leaps and bounds in the monthly active user metric. In June, the former company posted 2 billion MAUs, while the latter posted 1.5 billion. That means Facebook has almost six times as many MAUs as Twitter does, Youtube 4.5 times as many.
Twitter does, however, have 28.6% more MAUs than Snapchat, which is battling its own struggles.
DAU increases can sustain Twitter in the short run, as they should theoretically be accompanied by concomitant jumps in ad revenues. However, if the MAUs fail to grow in the long term, the social media company could be out the door before you can type 140 characters.