Twitter didn’t have as many users as it had assumed, 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 owing to a technical issue affecting connected accounts, according to its Q1 2022 financial report released this morning. Twitter says in its earnings statement that in March 2019, it debuted an account linking tool that allowed users with multiple Twitter accounts to link them together in its user interface, allowing them to switch between their numerous identities more simply.
Those several accounts plainly belonged to the same individual, yet they were still listed as independent mDAUs (monetizable daily active users). The mDAU metric was already a non-standard technique of quantifying users on the site that was self-invented. After failing to prove growth using quarterly measures of monthly active users, Twitter came up with the notion. Instead, the mDAU statistic would reflect people who signed in and visited Twitter through its website and applications on any given day and were able to view its advertising, according to the company. It did point out, however, that the number would not be comparable to other firms’ daily active user disclosures, since they would frequently use a broader statistic that included users who were not seeing advertising.
This statistic was created to offer marketers a better understanding of how many individuals on Twitter may be targeted with their marketing messages in a given amount of time. And, because advertising continues to be the lifeblood of Twitter’s business, accounting for the vast majority of its income, it was a critical statistic in determining the company’s health. Regrettably, it was incorrect. Twitter claims it re-ran the figures for the mDAU measure for the previous quarters and corrected 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.
Because of its data retention requirements, the recast data was not accessible earlier to Q4 2020, although the business estimated that prior period modifications would not be higher than those seen in Q4 2020. As the graph shows, as Twitter’s total user base expanded, so did the overcounting, culminating in an overstatement of roughly 2 million more mDAUs than the business actually had. To a competitor social network like Facebook, such a change would be scarcely noticeable – Meta just announced 2.87 billion daily active users in Q1 2022, while Facebook alone had 1.96 billion.
It matters more for a tiny site like Twitter, which has suffered with stagnant user growth in the past. Indeed, user growth had been such a thorn in its side that it had created that new indicator in the first place to better mask its problems. Despite the change, Twitter concluded the quarter with a presumably accurate 229 million monthly active users (mDAUs), up 15.9% from the same period last year and above analyst expectations of 226.9 million. However, the business had set a high aim of tripling revenue and achieving 315 million mDAUs by 2023. From the 152 million mDAUs recorded in Q4 2019, the mDAU objective would have indicated a nearly 20% compound annual growth rate.
Twitter felt it could do this through new product innovations, many of which could be monetized, such as 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, not only 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’s had an impact since the changeover to mDAUs.
At a point when its MAU base was above 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 with respect to its sponsors. Elon Musk has been preaching on Twitter about adopting a “free speech” policy, which frequently translates to a more tolerant attitude toward harassment, bullying, and hate speech. That’s not something brands want to be associated with.