Technology news site

Nearly 40 Million Active Users Don’t Use Twitter’s Site or App


Investors who drove up Twitter Inc. TWTR -2.35% ‘s market value by more than $3 billion this week might want to read the fine print.

The company on Tuesday reported that its second-quarter revenue more than doubled, and growth in the number of people using its service is rebounding, a positive sign for investors who feared Twitter’s popularity had peaked.

But buried in legalese in an online presentation accompanying Twitter’s earnings report is a number that reveals an unsettling trend: The share of users who never see advertisements on Twitter is accelerating, while growth of those who do see ads is shrinking.

Of the 271 million people counted in Twitter’s latest tally, 14%, or 37.9 million, never log in directly to Twitter’s website or mobile app, the only places where Twitter serves ads. Instead, they connect through hundreds of thousands of third-party applications that the users have given permission to link to Twitter.

twitter user graph

These are the users who, for example, read tweets on digital-news app Flipboard, share photos on Twitter from Instagram, blast their location from Foursquare, or tweet stories from news sites. But they never open Twitter’s mobile app or log in to Twitter.com, so they don’t see Twitter’s ads.
Other people counted as active users aren’t interacting with Twitter content. Some mobile apps automatically pull data from Twitter servers behind the scenes, even if the user isn’t running the apps. These people are all counted as monthly active users. That’s part of the reason the percentage of Twitter users who aren’t served ads has doubled to 14% from 7% one year ago.

“Going forward you could see that there’s a chance—and recent history has proven this out—that this number [14%] could continue to grow, and what happens if it hits 25%?” said Peter Stabler, an analyst at Wells Fargo.

When Twitter filed its initial public offering documents last summer, it said it expected the number of people using third-party apps to decline over time as more people use Twitter’s official mobile app. Instead, one year later, the growth of this third-party app population has far outpaced that of the population that Twitter can make money from.

“The question investors need to ask is how big is Twitter’s monetizable universe?” said Richard Greenfield, an analyst at BTIG. “I don’t have a clear and defined idea as to how they would [make money from] someone who is posting through Instagram.”

Twitter said its 271 million monthly active users in the second quarter represented a 6.3% increase from three months earlier. It was the second straight quarter that growth has accelerated after years of mostly shrinkage.

Stripping out the users who never see ads, user growth actually slowed to 3.9% from 4.4% three months earlier. Meanwhile, the growth of people who access Twitter through third-party apps accelerated to 24% in the second quarter from 17% in the first period. But Twitter gets no revenue from them because Twitter can’t serve ads in third-party apps.

A Twitter spokesman declined to comment on the reason for the growth in third-party app users, or disclose the number of registered third-party apps.

To be sure, Twitter has been finding ways to show more types of ads and drawing more dollars per user, especially on mobile phones, and its revenue more than doubled to $312.2 million in the latest quarter. Twitter may later find a way to sell ads to this vast audience of users who never access its website or app.

The behavior of some users on third-party apps also may also help Twitter in the long run. Many of these users are contributing content, and this is especially valuable when it comes from someone like basketball star LeBron James, who shares a photo from Instagram with his 13.9 million followers on Twitter. That is arguably more important than getting Mr. James to open the Twitter app and view an ad himself.

But for now, these third-party app users remain elusive. An unknown portion of these app users may never be viewing or sharing Twitter content. Twitter says these apps have the “capability to automatically contact our servers for regular updates.” This means some apps could be pinging Twitter’s servers even when the user hasn’t opened the app.

These users aren’t considered “bots,” said the Twitter spokesman, a word that is reserved for fake or spam accounts. Since its IPO filings, Twitter has said those accounts represent less than 5% of its users.

The asterisks underscore the hazards of relying on these sorts of measurements. Investors and analysts have fixated on Twitter’s monthly active users, believing that statistic gauges the service’s prospects for becoming a top advertising hub.

As The Wall Street Journal reported, Twitter has planned to introduce new metrics that illustrate the service’s reach beyond those who log in at least once a month. The aim, in part, is to sidestep comparisons with Facebook Inc., FB -0.40% whose site has nearly five times as many monthly active users at 1.32 billion.

Facebook has said that as of Dec. 31, 2011, fewer than 5% of its daily active users world-wide access the network through third-party apps that automatically contact its servers. This doesn’t include instances when users share or “like” content from a third-party app or website on Facebook.

A Facebook spokeswoman declined to disclose a more recent figure or how it affects the number of monthly active users.

There are some hints on how Twitter might wring some ad dollars from its third-party users. In late 2013, Flipboard started testing full-page ads for Twitter within its tile that flips through a user’s feed of stories pulled from his or her Twitter account.

There have been talks to “build beyond our product partnerships to a commercial one,” said Eric Feng, Flipboard’s chief technology officer.

source: YOREE KOH/Wall Street Journal

HTML Snippets Powered By : XYZScripts.com