Snap, Twitter Battle for Second Place -- by Different Measures
October 25 2017 - 12:51PM
Dow Jones News
By Georgia Wells
Social-media companies Twitter Inc. and Snap Inc. are locked in
a popularity contest -- but they haven't agreed on how their reach
should be measured.
Facebook Inc., their bigger rival, gives the number of users who
use its platform at least once a month, 2.01 billion, and at least
once a day, 1.32 billion.
But Twitter and Snap's Snapchat, which battle to be considered
the second-biggest network, haven't disclosed metrics that
facilitate comparisons between them.
Twitter, which has been around longer than Snapchat, says how
many monthly users it has. When it reports third-quarter earnings
on Thursday, analysts surveyed by FactSet expect it to post 0.5%
growth in monthly users to 329.6 million.
Snap, which first released its user figures in February ahead of
its IPO, discloses the number of daily users. A Snap spokesman said
daily usage is a better reflection of engagement. At last count,
Snap had 173 million daily users.
Snapchat's success in getting users to log on frequently and for
long periods has pushed the industry to focus more on daily
usage.
"There isn't a consistent way people measure this," says Michael
Nathanson, senior research analyst at research firm
MoffettNathanson. "Each company picked the best metric to define
their own narrative."
The different approaches have made it impossible to accurately
compare the size and growth of social-media companies. But the
metrics are the most basic way for investors, analysts and others
tracking the industry to understand how many people use these
networks -- and ultimately, how much these networks could earn from
advertising or other sources of revenue.
Twitter has teased its daily use. In late 2016, to provide
metrics beyond stagnant monthly user growth, Twitter told investors
its daily users had grown 7%, without revealing the raw number. In
the following three quarters, Twitter updated its daily user
growth, and flagged it again to investors. That prompted the
Securities and Exchange Commission to query Twitter as to why it
wasn't providing the actual number.
Twitter said in a letter to the SEC in June that releasing its
daily users could cause "confusion when comparing the company with
other companies," such as Facebook, that calculate daily users
differently.
A spokeswoman for Twitter declined to comment on why the company
hasn't released its number of daily users. She also declined to
comment on Twitter's discussions with the SEC.
Analysts say the monthly metric is good for assessing reach.
Daily use, on the other hand, gives a sense of how users engage
with the network. The average number of minutes users spend on an
app is another metric that measures user engagement. Some companies
such as video app Houseparty and anonymous polling app TBH, which
Facebook acquired last week, emphasize downloads or sign-ups.
One reason for these discrepancies is a lack of regulation. The
Financial Accounting Standards Board sets the rules for reporting
financial results, and the SEC enforces them, but there isn't a
governing body for the nonfinancial information that companies
release.
When there is no commonly accepted method of calculating a
particular nonfinancial metric, the SEC has said companies should
provide an explanation of the calculation of a metric "to promote
comparability" across parties within the industry.
Still, other industries, such as railroads and cruise lines,
have managed to coalesce around certain nonfinancial metrics
without certain regulatory oversight, such as train speed and the
average time a train car spends at a specified terminal, says Jack
Ciesielski, publisher of the Analyst's Accounting Observer, a
research service for investors that discusses accounting
issues.
Going forward, the metrics these social-media companies provide
could change. Investors in earlier-stage social-media companies are
demanding to see more data to describe a company's growth. Eric
Kim, managing partner at Goodwater Capital, a venture-capital firm
that focuses on consumer technology, says he wants to see new user
adds, time spent and retention before making any investments.
But analysts say social-media companies that compete with
Facebook also use different metrics with the intention of making
direct comparison with the industry giant more difficult, and to
try to emphasize why they are different.
Houseparty, for example, touts the 51 minutes the average user
spends on its app every day.
"As a social-media company, you are trying to show your value
add, and that will vary from platform to platform," a spokeswoman
for Houseparty says. "Our value proposition is about being able to
spend more quality time with people you would engage with in the
real world."
(END) Dow Jones Newswires
October 25, 2017 12:36 ET (16:36 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Snap (NYSE:SNAP)
Historical Stock Chart
From Aug 2024 to Sep 2024
Snap (NYSE:SNAP)
Historical Stock Chart
From Sep 2023 to Sep 2024