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Facebook, LinkedIn and Twitter Earnings Tell Very Different Tales

Facebook, LinkedIn and Twitter Earnings Tell Very Different Tales

Facebook, LinkedIn and Twitter are often lumped together as the kings of social media. They are also often unjustly compared.

Facebook, Twitter and LinkedIn all recently announced their latest earnings, and the reports highlight profound differences in each of the platforms, as well as unique future opportunities. The companies, operators of three of the world's largest and most popular social networks, may be competitors, but when you enter their walled gardens the purpose and intent is increasingly varied.

Wall Street can't help comparing them, but the metrics provided by each company are so different that the practice rarely elicits meaningful analysis. All three companies have strengths and weaknesses, but analysts and investors are almost entirely focused on user growth, revenue and the shift to mobile.

Facebook is virtually untouchable in its quest for more users. The company's monthly active users (MAUs) number grew 14 percent year over year to 1.35 billion, while daily active users (DAUs) increased by 19 percent to 864 million during the same period. Facebook experienced even stronger growth on mobile. Its mobile DAUs increased by 39 percent year over year to 703 million, and mobile MAUs grew 29 percent to 1.12 billion during the same period.

Twitter, which is constantly compared to Facebook, isn't growing fast enough to satisfy investors. The company's growth rate slowed during the last quarter, and it added just 13 million new users. Twitter ended the quarter with 284 million MAUs, a 23 percent increase over the prior year.

Twitter doesn't provide DAU numbers, but the company continues to perform well on mobile. Mobile MAUs represent about 80 percent, or 227 million, of Twitter's total monthly users. Twitter CFO Anthony Noto says a little more than half of the company's MAUs are using the service every day. Meanwhile, Facebook is closer to 75 percent in that category.

"They've not only been able to grow their MAUs, but the DAUs as a percentage of MAUs have been growing at a solid clip," says Seth Shafer, research analyst at SNL Kagan. "I've never heard anyone get close to that as far as ratio of DAUs as a percentage of MAUs...It really comes down to a function of just how engaged your audience is to some extent."

LinkedIn's user growth is more difficult to pin down and compare to Facebook or Twitter because of its reluctance to adopt industry standard metrics. LinkedIn also magnifies low usage rates overall by reporting its cumulative member totals, which grew 28 percent to 332 million during the last quarter. Only 90 million users, or 27 percent of its entire user base, visit LinkedIn on a monthly basis. Unique visiting members jumped 16 percent and member page views grew 28 percent during the quarter.

Follow the Money (or Lack of It)

Users may be the most valuable commodity for these companies, but the money they make (or lose) in return shows just how different the businesses are. Facebook banked $1.4 billion in net income on revenue totaling $3.2 billion during the last quarter. Revenue and income increased by 59 percent and 90 percent, respectively. The profits end there, however; Twitter and LinkedIn continue to lose significant money.

Twitter posted a $175-million net loss on $361 million in revenue, compared to a net loss of $65 million on $168.5 million in revenue the year prior. LinkedIn revenue grew at a slower rate than Twitter, but its losses are much less troubling. The company posted a 45 percent increase on revenue of $568 million and ended the quarter with a loss of $4.3 million. Though both companies remain unprofitable, not everyone is worried -- at least not yet.

"If you look at similar analogues, I think it would be more surprising if Twitter were profitable right now," Shafer says. "I pretty much have zero concern on that part because they have a clear path to make quite a bit of money."

Shafer isn't discouraged by Twitter's slower growth in MAUs, because its ad revenue sees triple-digit growth quarter after quarter. "It's just not a service that appeals across a family...It's a different offering," he says.

All those unfair comparisons to Facebook took a toll on the company, and Twitter executives are doing everything they can to make it look like Twitter is on par with the much larger social network.

Twitter CEO Dick Costolo repeatedly tries to convince investors of the untapped opportunity his company represents, but the logic is painful and difficult to follow. He describes Twitter as three "geometrically eccentric circles:" registered users who log in and use the service every month; people who visit Twitter without logging in; and people who see tweets embedded on other sites or syndicated on television.

How Big Is Twitter (and Does It Even Matter)?

Twitter's audience could be equal to or larger than Facebook's audience, but Twitter hasn't quantified how many people engage without logging in, and none of those users see ads anyway. The implication is that Twitter still has spigots it can twist to increase ad revenue, but the company has made no concrete steps in that direction.

Wall Street prefers to focus on the more tangible results, and as such, Twitter's stock was hammered. The company's valuation decreased by more than 17 percent during the past 30 days. Facebook is up 2.7 percent during the same period, and LinkedIn is up more than 17 percent.

"Twitter simply hasn't changed much over the past nine years," writes Nate Elliot, vice president and principal analyst at Forrester. "While it has enormous notoriety, that hasn't translated into an enormous user base. If the company can't get more people engaged with its site more often, marketers might shift their focus elsewhere."

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