Could it be that market sentiment is starting to shift away from monthly active users (MAU) as the key stat to measure social platform growth?
For a long time, social platforms like Twitter have suffered in Facebook's shadow - Facebook, now at 2.2 billion users, has been able to grow well beyond what any other social platform has, which, consequently, has put increased expectation, and pressure, on smaller players to keep up.
That makes sense - more users equals more advertising and revenue potential - but ongoing, exponential growth is simply not possible for all apps, while it's also not the only way for them to maximize their earnings capacity.
Twitter has demonstrated this in its latest earnings report - first off, on active users, Twitter reported another decline, dropping from 335 to 326 million MAU.
That's a problem, right? Twitter is seeing less usage - the market will savage them for this.
Well not quite.
In explaining the decline, Twitter notes that its ongoing efforts to eliminate spam and bots, remove those who violate the platform's rules, and adhere to the new GDPR regulations have lead to a perceived decline in activity. But perception is not reality - as Twitter emphasized in its accompanying letter, while they do expect to see MAU continue to decline as they remove more 'bad actors' from the platform, the benefits will come in improved actual engagement, day-to-day.
"Looking ahead, we expect to see a sequential decline in MAU in Q4 given our ongoing health work, decisions not to renew or move to paid SMS carrier relationships in certain markets, and our decision to allocate resources towards GDPR and health. Based on our current level of visibility, we expect the decline to be mid-single-digit millions of MAU. As a reminder, DAU growth continues to be the best measure of our success in driving the use of Twitter as a daily utility."
And Twitter's DAU figures are improving, though that improvement has slowed slightly.
In fact, before this result, Twitter had actually posted seven consecutive quarters of double-digit growth in DAU. which an impressive result.
It almost reached double-digits again this quarter, which shows that while its top line usage stats may be lower, the platform is doing something right.
So MAU is down, DAU is up, year-over-year, that balances out somewhat, maybe. But the more impressive stat, which did please the market, was this:
"Total revenue reached $758 million in Q3, an increase of 29%. Total US revenue was $423 million, an increase of 28%, while total international revenue was $335 million, an increase of 30%."
That result beat analyst estimates of $703 million, and definitely caught the eye of many investors. Twitter stock immediately jumped 9% on the announcement, and has continued to climb (reaching as high as +12%).
The revenue jump shows that while Twitter's overall audience may be smaller, the potential to monetize that audience, by improving the content people see, the relevance of the ads they're served and increasing day-to-day engagement, is significant, and could be a way forward for the app in future.
Snap Inc. has put forward similar arguments - while Snapcjhat may not ever be able to compete with Facebook on overall users, they do see high engagement in the app, and that can lead to stronger conversion potential. Snap has yet to prove its case in this regard, but Twitter, with these results, is showing that it is on the right track - that removing spam and junk may impact your top number, but the audience and business benefits may be worth it.
It's one result, so it's hard to use this as an indicative marker, but it is a positive sign, not just for Twitter, but for the sector overall.
In terms of region-specific growth, Twitter says that it "saw broad-based revenue growth across all regions".
"Japan remains our second largest market, growing 44% and contributing $130 million in Q3."
And video ads remain key - Twitter says that:
"Total ad engagements increased by 50%, resulting from increased demand, continuing mix shift toward video ads, particularly the Video App Card and Video Website Card, and improved CTR, which grew on a year-over-year basis across the majority of ad types as ad relevance continues to improve."
It's a positive report for Twitter, though, again, the MAU stat does cloud it. For years, the suggestion has been that Twitter has refused to take action against fake profiles and bots because of this - because those bot accounts have helped to prop up its MAU number, which it needs to keep high to avoid negative perception. Given this, the reduction here is actually a positive - Twitter's taking action on a key issue (previous estimates suggest that 15% of Twitter's MAU count is made up by bots), which will not only help improve the accuracy of its data, but will also improve advertiser trust in its targeting, thereby encouraging further spend.
If Twitter can continue to show improved revenue results, the significance of that MAU number will decline, and that may encourage more businesses to look at the platform and see how they can use it to maximize their digital marketing performance.