For the last four quarters, Twitter (NYSE: TWTR) has reported its year-over-year growth rate for daily active users (DAUs). But when pressed for an exact number, Twitter won't budge. That stands in contrast to other social networks like Facebook (NASDAQ: FB) and Snap's (NYSE: SNAP) Snapchat, which both readily offer that information to investors every quarter.
The SEC recently questioned Twitter's decision not to provide its DAU numbers. It formally asked Twitter, "Please explain why you present the actual number of monthly active users [MAUs] but only the percentage change in DAUs, and tell us how the percentage change information provides an investor with a clear understanding of user engagement on your platform."
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Twitter's response contained a couple of interesting tidbits.
An internal metric of engagement
Twitter says the percentage change in daily users is actually what management uses internally to evaluate the health of the platform. Sharing that metric with investors, the company argues, allows investors to judge the platform the same way management does. "The absolute number of DAUs is less important than the percentage change in DAUs because the key factor is whether engagement is increasing or decreasing on a relative basis," according to Twitter.
Looking at the last six quarters, it's clear that engagement by that measure is increasing.
DAU growth has outpaced MAU growth in each of the last five quarters, indicating increasing engagement among Twitter users. That said, MAU growth has been extremely slow compared to competitors like Facebook or Snapchat.
Facebook has grown MAUs about 17% in each of the last three quarters. Snap doesn't report Snapchat's MAUs, but DAUs increased 36% year over year last quarter.
But the idea that management doesn't pay attention to the actual DAU numbers, instead focusing on the growth rate relative to MAUs, doesn't really make sense. The absolute number of DAUs is an extremely important metric for any social-media company.
A marketer isn't going to care how many more DAUs Twitter has than last year -- it wants to know whether it has more DAUs than Snapchat. Furthermore, not only do DAUs have a direct impact on advertising revenue, but more daily users means more valuable data for Twitter to license to enterprise customers.
The real reason Twitter won't give us the number
Twitter's response to the SEC went on to say, "[Twitter] also focuses investors on percentage change rather than absolute DAU numbers to avoid confusion when comparing [Twitter] with other companies that disclose information regarding DAUs, but use different definitions of DAUs that may include different segments of their respective user bases."
Twitter specifically calls out Facebook, which counts Messenger users in its DAU number if they log in using their Facebook credentials. (Note: Facebook doesn't include Instagram or WhatsApp users in its active user count unless they would otherwise qualify as such.) Facebook counts 1.2 billion monthly active users on Messenger and 2.06 billion on Facebook, as a whole.
Twitter says this discrepancy would invite unfair comparisons between itself and Facebook. Indeed, investors often compare Twitter to Facebook -- I'm doing it right now -- and that comparison is already unfair considering the differences in the two companies' products.
What it boils down to is Twitter is afraid that releasing an actual number of DAUs will make it look bad compared to its competitors. It likely has fewer daily users than Snapchat, and it certainly has fewer daily users, as a percentage of its monthly users, when compared to Facebook, Instagram, and WhatsApp. While engagement is improving, it's still well below the competition. Twitter just doesn't want to tell investors how bad it really is.
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