Change is the Only Constant

Social Media companies are mutating where their business models are rapidly changing from platform driven to ecosystem driven.

If we look from a traditional application usage metrics, Snapchat grew by 57% YoY, FB Messenger by 50%, Pinterest by 43% – were the fastest growing platform outside China in 2014 forcing platforms like WhatsApp (Facebook) to introduce new services like voice call. After Introduction of “Discover” feature in Snapchat, data consumption per users has grown rapidly from 100MB/MAU in Dec2014 to 400MB/MAU in Feb2015 (source: 7Park Data) mostly dominated by short video sharing. This signifies how growing the platform with new features is helping newer platforms to drive engagement and usage.

Figure: Q: Which of the mobile/tablet application have you used in last month Source: Global Web Index Q1 to Q4 2014, internet users 16-64 ex China (click to zoom)

Big players like Twitter also pivoting from their core “real time feed” to some new feature like “While You Were Away” to revamp user engagement level. Twitter also initiated Tweet Commerce last year. Some of the leading banks from India, ICICI Bank and Kotak Mahindra Bank have started linking their users’ accounts to their twitter profiles to bring more convenient mobile banking experience. Twitter is also partnering up with KeyBank from USA and many other banking service providers from UK & worldwide for the same. This move also provides a glimpse of these networks trying to differentiate, leverage hundreds of millions of active user-base to engage them in novel ways and improve their monetization capabilities beyond advertisements.

Figure: Twitter: While You Were Away interface (click to zoom)

Whereas, professional social networking platform Linkedin is keen on increasing user interaction levels sticking to its core value which is “professional networking”. They are experimenting with new user interface to make it more intuitive by separating personal feed like photo updates, new job changes etc. from its tradition news and content feed to increase stickiness.

Figure: New User Interface of Linkedin (click to zoom)

Without much of a doubt, it’s clear that all the social media platforms are shifting their focus more towards ”engagement” experience within their ecosystem and leveraging it to generate newer monetization schemes and stickiness.

Challenges lies in evaluations

As the social media networks evolve from platforms to ecosystems, it is becoming more challenging to valuate these social media networks. MAUs alone is no longer a solid metric to gauge the value of a social platform. For example: During Twitter’s recent quarterly earning call Q4 2014, Twitter tried to explain to investors why the company lost four million users during the quarter. The explanation is that, Safari Web browser on iOS was automatically pulling Twitter data whether the users were engaging or not with the Twitter timeline and these were counted as Twitter active users. However, after their iOS 8 update, the browser was no longer pulling the Twitter data which led to reduce number of active users according to Twitter’s MAU definition. Nevertheless, other apps still using twitter authenticated API’s for similar purpose are being accounted to Twitter’s MAUs. This opens up an entire can of worms in comparing different social networks on MAU growth alone.

Facebook is also guilty of false counting of active users who are using Facebook authentication for login, comment, like in other platform without being active on Facebook.

Similarly, MAU is failing as a metric to exactly measure the usage and engagement of other networks such as WhatsApp, Line, WeChat etc.

Then why do these companies use MAU as a parameter?

There are some basic reasons as follows.

Firstly, it has a historical reference and easy to compare with previous data and it’s “supposedly” an unique parameter of measurement across multiple social media platform and signifies the breadth of the platform.

Secondly, big players also like to showcase their strength using big numbers thus becoming standard norms in the industry.

If not MAU then what to look at?

Many companies have adopted no advertising models (e.g. WhatsApp) and are in for long-haul play and earn revenues from platform play compared to some like Facebook which are generating billions of revenues using advertising. For likes of Facebook or Twitter, no. of users and how they engage and how much time they can spend on the platform are key metrics to attract marketers/advertisers and generate revenues. So this doesn’t give a fair assessment when compared to Snapchat or Whatsapp.

Therefore, MAUs and revenues are no longer metrics enough to understand the true value of the platform, rather industry should focus on measuring and comparing the “engagement” metrics.

For e.g.

Twitter: No of interactions with the tweets and timeline views
Facebook: No. of interactions with posts – Likes, Shares and Timeline views
WhatsApp, WeChat, Line, etc: Content shares: Incoming vs Outgoing message and contents.
Snapchat, Instagram, Vine etc. : Incoming vs Outgoing Data Consumption and Content share ratios. etc.

While we believe some of these networks might be sharing (pitching) these core engagement metrics to current and prospective customers (ad publishers, marketers) to attract them to their networks but for overall investors, industry watchers it is hard to judge just based on MAUs.

“Monthly Active User” Metric is dead, Long Live the “Monthly User Engagement” Metric.

We at Counterpoint will continue to explore the best way to measure success and stickiness of these platforms as they become ecosystems.

If you would like to learn different strategies of these companies or if you have any follow-up questions or comments on the above post. Please feel free to reach out to us analyst@counterpointresearch.com