For Advertisers And Investors, Social Network User Numbers Often Don't Add Up

When does 845 million not equal 845 million?

When it's the number of active users Facebook claims in its initial public offering filing. Last week the social networking giant amended that filing and conceded it may not be so giant. While still massive, Facebook said as many as 6% of those accounts may be fakes and another 5% may be from people who downloaded Facebook's mobile app and have it running in the background of their device even though they no longer use the site.

"Anyone who has logged in within a month is considered an 'active user' depending on who you're talking to," said Ed Zitron of TriplePoint PR in New York. "People use Quantcast and Compete to judge these scores, but those can be inaccurate."

The self-reported nature of social network statistics is presenting problems for advertisers who are looking for places to spend their online ad budget and investors who want to know the true value of Facebook before they purchase shares in the IPO. While every major social network and search engine is looking for ways to better target ads and increase click-through rates, sheer size may be a factor for companies looking to run an initial advertising campaign.

"The only number an advertiser cares about is the number of prospective customers it can reach -- and what it takes to get them to buy whatever it is the advertiser is selling," said Marty Levine, executive vice president of product development at Prosyna Inc.

Advertisers are finding it hard to figure out the exact number of those prospective customers on social media. Facebook said 463 million, or more than half, of its users check the site everyday. And, at first glance, that seems about right if you spend any amount of time hanging out with people under 30 who often use it in place of email and traditional chat clients. But the numbers were drawing increased scrutiny from Wall Street analysts trying to price Facebook's IPO, which prompted last week's clarification.

Facebook is not, however, the only social network that may -- or may not -- be exaggerating its claims:


"Measuring user interaction is a finicky business at the best of times, but exactly how you'd police such a problematic area is tricky at the best of times," said Lance Paterson, a brand designer and consultant. "For example, Twitter claims 175 million users: however, 56 million of those do not follow a single other account. In fact, some studies claim that only 5% of accounts are responsible for 95% of all tweets. So is there any value in the process at all?"

The individual idiosyncrasies of each site also play a role. Is Google counting me as an active user of Google+ when I click on search results that got pushed to the top because people I am connected to on Google+ found the same link useful? Do I get counted as an active Facebook user if I "like" an article in the Boston Globe every few days but never log into Facebook? Does Twitter count me as an active user if I use a third-party client to post tweets, but never go on Twitter's own site where I would potentially see promoted tweets and ads?

"Unless you're Pepsi or possibly Budweiser you need to understand the potential response from the subset you really care about: your target customers who may or may not be active on a particular social network," Levine said. "And you need to care more about the factors you can control, including the timing that will find them most active and the content that will attract them."

None of this is to suggest that social networks are deliberately trying to mislead advertisers and investors. The simple fact is that it's difficult - and getting even more difficult - to track who is doing what on your social network. As users have become more privacy conscious, many have adopted anti-tracking software, which also throw off the numbers. Add in privacy laws, like the new European Union online privacy laws, and it gets even harder for social networks to at least publicly disclose how many people are using the site.

You can thank Facebook's IPO for all the sudden scrutiny of active users. People who advertise on social networks get fairly detailed analytics and, at the very least, they can tell whether or not an ad is working and whether or not they should continue using a platform. Wall Street investors, however, don't have access to those analytics and need to rely on the raw numbers - raw numbers that they often have to trust the companies to give them.