All told, hundreds of millions of people across the world use the major social media sites like Facebook, Twitter, and LinkedIn. This suggests a robust user base that gives the impression that social media is still in demand, yet last week’s earnings reports, which shed some light on user engagement, from three of the big players in the industry suggest otherwise.
Last week saw Twitter and LinkedIn come out with earnings. Yelp — which isn’t traditionally regarded as a social media site, per se — was among those companies that issued reports. The common trend among all three major names was that data on their respective user numbers was disappointing. Accordingly, investors punished the companies’ stocks with strong selloffs after the earnings were released. Only Facebook, which released its earnings back in April, seemed to be doing well.
Twitter, whose quarterly revenues were lower than analysts’ expectations, reported just 302 million active users for the first quarter of 2015. While this sounds like a big number, it actually represents a failure to add more new users at the quick pace most analysts were expecting. Twitter CEO Dick Costolo had been raising hopes over the past year that the company’s product improvements would both lure back old users and bring in new ones, but the 302 million figure is weak against this backdrop.
LinkedIn also disappointed with its earnings report. The company failed to provide an exact user base number for the first quarter of 2015 in its report. While LinkedIn is believed to have approximately 350 million users, analysts were expecting the company to report more than 362 million by this quarter.
Then, there’s Yelp. It had perhaps the worst report on user numbers of all three. While it confirmed that its user base increased by 8 percent to approximately 143 million in the first quarter of 2015, the company actually reported a 30-percent decline in the number of users in the first quarter compared to a year ago. This has led to concerns that the site just isn’t adding new users at a rate that suggests growth.
All three companies’ bad earnings reports were based on a slowdown in the addition of new users. To remain fiscally healthy and beat earnings, all social media giants would have to add more users at a quicker pace going forward.
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