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CEO Dick Costolo (above) and CFO Anthony Noto are asking for a lot of trust. Source: Twitter.
Starting this year, Twitter is no longer providing investors with the one engagement metric it used to provide. Management now claims that "timeline views per user" doesn't provide an accurate picture of engagement, so it decided to stop reporting the metric.
During the first-quarter conference call this year, management was pressed about whether it will provide investors with any standard metrics for gauging engagement. CFO Anthony Noto told analysts, "... [W]e would like to be able to give you more visibility in this, but there is [sic] just a number of different measurements."
In other words, he doesn't want to risk giving investors every metric every quarter for fear that they'll get nitpicked to death. At the same time, he's implicitly asking investors to trust him to let them know how engagement is tracking.
How was engagement during the first quarter?
Noto didn't hesitate to provide a few select engagement metrics during the first-quarter conference call. Searches and direct messages on the platform accelerated, he said, while favorites and retweets exhibited strong growth. Tweets per day also grew, but he didn't specify whether those metrics were calculated on a total- or a per-user basis.
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When it came to timeline views per user, Noto declined to provide any details. He said it's not a metric the company looks at internally, and it's pursuing features that actually decrease timeline views. However, Noto also told analysts, "We continue to look for metrics that could be helpful to you, and we will try to give you color from time to time across these different metrics."
So while Noto is promising that he'll give investors some insight into how engagement is going, he's going to exercise complete control over how and when he provides that information. Without a consistent metric to measure engagement in both good and bad quarters, investors are being kept in the dark to a certain degree.
With user growth and monetization growth slowing -- and practically impossible for Twitter to hide -- one would think that if engagement were outperforming, Twitter would want to show it off. Of course, monetization reflects user engagement to a certain degree as higher engagement leads to more ad impressions. Indeed, Twitter saw a 32% increase in ad impressions last quarter, but that's a significant slowdown from the triple-digit growth rates the company saw throughout last year.
Does Twitter have an engagement problem?
As fellow Fool Tim Brugger points out, Twitter's inability to engage users -- particularly new ones -- is readily evident. "The 500 million monthly visitors to Twitter that don't become members doesn't demonstrate Twitter's 'popularity,'" he says, "it reinforces poor user engagement."
Twitter is, however, working on new features and systems to improve engagement. During the first-quarter earnings call, CEO Dick Costolo said Twitter's new instant timeline feature -- which algorithmically follows other users when a new user signs up and imports his contacts -- provided a boost in engagement to new users. He also noted it didn't help retain users at a higher rate, though.
Additionally, the company rolled out "While You Were Away" earlier this year to surface tweets users missed since the last time they logged in. The idea is to show users that there's always something interesting on Twitter, leading them to log in more often.
Ultimately, however, Twitter is losing the attention of many of its more casual users for more engaging social networks such as Instagram, Facebook , Snapchat, and other smaller social networks, which have seen an increase in user engagement as they roll out new features. Facebook claims its users spend an average of 40 minutes per day on its flagship platform, and the average Instagram user spends more than 21 minutes per day.
As other social networks gained popularity last year, Twitter's timeline views-per-user metric fell for four straight quarters before improving in Q4. Unless it can find a way to fend off the growing competition and the stalwart Facebook, Twitter may never find that magic metric that makes its engagement look great.
Twitter's management is asking investors to trust it to provide some insight on engagement, albeit in a non-systematic manner. However, it should be really hard for investors to do so, considering the increasingly competitive environment Twitter operates in and the slowdown in its other important metrics.
The article Twitter Inc. Executives Are Asking Investors to Trust Them: Should They? originally appeared on Fool.com.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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