To be sure, social media companies are still growing at a rapid clip. Even Twitter, which missed its own revenue guidance for the last quarter causing investors to send shares of its stock plummeting last week, grew revenue 74% from the same quarter in the prior year.
Twitter’s woes highlight that much of the social media stock slowdown has to do with expectations.
Investors have high hopes for these companies and to justify the premiums that have been placed on their shares, they have to deliver stellar results, not just good results.
Even with still-rapidly growing revenue, more and more companies are finding it hard to live up to that standard.
The metrics that matter
Of course, most marketers have no reason to get caught up in the analyst expectations game. Unless a company finds itself in total distress, marketers shouldn’t base their social spend on a social media company’s stock price.
But buried within earnings reports are metrics that marketers would be wise to pay attention to.
One of those metrics is user growth. It’s an indicator of interest for marketers for obvious reasons.
On this front, Twitter’s user growth has been a source of concern for some time. Its monthly active users grew by just 18% year-over-year in the last quarter and Twitter CEO Dick Costolo indicated that this metric didn’t improve in April.
(Chart courtesy of Business Insider)
Yelp’s declining user growth, which stood at just 8% year-over-year in the last quarter, is even more precipitous.
Marketers can also use earnings reports to gain intelligence about where and how other marketers are directing their spend. Facebook, for example, continues to derive more and more of its total ad revenue from mobile ads, while LinkedIn saw a 10% decline in display ad revenue in the most recent quarter.
Obviously, marketers will ultimately base their decisions on ROI and internal strategy, but now that social media as an industry is maturing, it’s probably not a bad time for them to pay closer attention to the publicly-traded companies in the space.