Twitter didn’t have as many users as it had assumed. It is a situation that may have prompted the firm to reconsider accepting Elon Musk‘s offer to take the company private for $44 billion. Twitter admits that it had been overcounting the number of users on its service for at least three years. It is due to a technical issue affecting linked accounts, according to its Q1 2022 earnings report released this morning.
Twitter says in its earnings statement that in March 2019, it launched an account linking tool. It allowed users with multiple Twitter accounts to link them together in its user interface. Thereby, permitting them to switch between their numerous identities more simply. Those several accounts belonged to the same person, yet they were still listed as independent mDAUs (monetizable daily active users).
The mDAU metric was already a self-invented, non-standard technique for counting users on the site. After struggling to show growth using quarterly measurements of monthly active users, Twitter came up with the idea. Instead, the mDAU statistic would represent people who signed in and accessed Twitter through its website and applications on any given day and were able to view its ads, according to the company. It did point out, however, that the statistic would not be comparable to other firms’ daily active user disclosures, as they would often use a broader metric that included users who were not seeing ads.
This metric was created to offer advertisers a better understanding of how many individuals on Twitter may be targeted with their marketing messages in a given amount of time. Since advertising continues to be the core of Twitter’s business, accounting for the vast majority of its revenue, it was a critical metric in determining the company’s health.
Regrettably, it was incorrect.
User chart
Twitter claims it re-ran the figures for the mDAU metric for the previous quarters and adjusted the totals after discovering it had been overcounting. Its investigations revealed that, depending on the quarter, it was overstating mDAUs by ranging from 1.4 million to 1.9 million. (The firm stated that the recast data was not accessible earlier than Q4 2020 due to data retention requirements. But its calculations indicated that prior period adjustments would not be higher than those seen in Q4 2020.)
As Twitter’s overall user base rose, so did the overcounting. Thereby, resulting in an overestimate of approximately 2 million more mDAUs than the business had.
A competitor social network like Facebook would scarcely notice such a change. Meta recently stated that its family of apps had 2.87 billion users in Q1 2022. Facebook alone had 1.96 billion. It matters more on a small site like Twitter, which has suffered from flat user growth in the past. Indeed, user growth had been such a thorn in its side that it had created that new metric in the first place to better mask its problems.
Not the first time Twitter overcounted users
Despite the change, Twitter completed the quarter with a presumably accurate 229 million monthly active users (mDAUs). It is up 15.9% from the same period last year and exceeds analyst expectations of 226.9 million.
However, the company had set a high aim of doubling revenue and reaching 315 million mDAUs by 2023. From the 152 million mDAUs recorded in Q4 2019, that mDAU objective would have indicated a nearly 20% compound annual growth rate. Twitter felt it could do this through new product developments. Many of them could be monetized, like Super Follow subscriptions, ticketed Twitter Spaces, and Twitter Blue, a premium membership service. But it’s evident that Twitter still has a long way to go in terms of making those expenditures pay off. Also, it is not just in terms of dollars and cents, but also in terms of drawing new users.
This isn’t the first time Twitter has reported incorrect user numbers. But it’s the first time it HAD an impact since the changeover to mDAUs. At a point when its MAU base was over 300 million, the business confessed in Q3 2017 that it had overcounted its MAUs by 1 to 2 million.
The blunder might put Twitter in even more jeopardy concerning its sponsors. Elon Musk has been preaching on Twitter about adopting a “free speech” policy. It generally translates to a more tolerant attitude toward harassment, bullying, and hate speech. That’s not something brands want to associate with.