If “A Tale of Two Cities”were written today and Charles Dickens chose social networkers, instead of cities, as his subject, the opening line might go a little something like this:
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of metrics.
“If you are a social network, the two most important metrics for you are your user base and the level of engagement of the users,” says Shaym Patil, Vice President of equity research at Wedbush.
The value that Wall Street places on a social network like Twitter or Facebook is primarily based on its MAU’s, or monthly active users–the more active users, the more potential for ad revenue. This is why when Twitter announced its third quarter earnings Monday, its stock took a hit.
Investors are worried that Twitter’s user base isn’t growing fast enough. It’s not anywhere near the gold standard of social media companies, Facebook. Twitter’s active user base is about one fifth of Facebook’s
But Nathan Eagle, CEO of Jana, a mobile marketing platform, is skeptical of the one metric fits all approach. “Twitter and Facebook have different models and they are going after different things,” says Eagle.
Twitter, for example, doesn’t just sell ads. It has a whole suite of developer tools it sells to companies like Jana. It offers tools for detecting crashes and monetizing, for example.
These are parts of Twitter’s business model that aren’t reflected in the MAU numbers. As a result, Nathan Eagle thinks Twitter should have its own more sophisticated metric for assessing its value. “MAU’s are at least a proxy for success,” But says Eagle, “I do think that we will come up with more nuanced metrics.”
Until that more nuanced metric arrives, the almighty MAU will likely reign supreme. Or, as Dickens said, Twitter and Facebook will continue to live, “for good or evil, in the superlative degree of comparison only.”
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