Is Facebook accurately counting its daily active users?
New reports on the matter suggest Facebook is counting users that "like" a page or article from a third-party site, making some wonder if the company's daily active user tally is too high.
Facebook's monthly and daily active user tallies have been celebrated in Silicon Valley, but a deeper analysis of those figures has revealed that they might not tell the whole story.
The New York Times' Andrew Ross Sorkin last night published a column discussing the odd method with which Facebook measures daily active users. In last week's IPO filing, the company reported that it has 845 million monthly active users and 483 million daily active users. However, as Sorkin points out, Facebook failed to mention that many of those daily users might not be using Facebook.com.
"We define a daily active user as a registered Facebook user who logged in and visited Facebook through our website or a mobile device, or took an action to share content or activity with his or her Facebook friends or connections via a third-party website that is integrated with Facebook, on a given day," Facebook wrote in its S-1 filing papers. "We view DAUs, and DAUs as a percentage of MAUs, as measures of user engagement."
It's that element of "connections via a third-party Web site that is integrated with Facebook" that Sorkin finds troubling. Based on that, it appears that anyone who might "like" a Web site or article but never visit Facebook is a daily user.
It's an issue that Sorkin discovered from Barry Ritholtz, who wrote about the measurement over the weekend. The director of equity research at Fusion IQ said in his blog that the daily active users who actually go to Facebook.com appears to be much lower than the 483 million tally, and from a business perspective, users who don't visit the site "cannot be marketed to, they do not see any advertising, they cannot be sold any goods or services."
Still, active users is just one of many metrics that could be used to determine a company's success and its opportunity for growth. Facebook co-founder and CEO Mark Zuckerberg explained at his company's F8 Conference last year that the social network's focus has shifted from counting the number of users on the site to how engaged they are. He went on to say that his company spent its first five years trying to add users, but now those folks are looking to "stay connected every day."
One of the key ways Facebook is trying to help people stay connected is through its Open Graph "actions." The actions help third-party publishers link their content with the social network, allowing users to see what a friend is doing on another site and join in.
From an investment perspective, as both Sorkin and Riholtz point out, engagement across other sites isn't necessarily a good thing. But perhaps that's a short-sighted view. Sure, Facebook users are interacting elsewhere around the Web and not seeing ads on the home page, but they're engaged, nonetheless. The social network is trying to make its site the central hub for many of the things people do on the Internet.
"It's all here, it's your whole life," Zuckerberg said of Facebook's home page at the F8 conference.
Facebook hopes to raise as much as $5 billion on a $100 billion valuation through its IPO. Last year--even with its odd daily active user counting--the social network earned $1 billion on $3.7 billion in revenue.