Those millions on Facebook? Some may not actually be visiting.

by whengwe8 on 2012-02-07 15:15:55

Facebook's count, oddly enough, is actually more transparent than some competitors. Google recently came under fire for revealing only the number of registered users for its Google+ service, which few people use regularly. Twitter has faced similar criticism. At least Facebook tries to count only those people who are engaging with the service in a meaningful way. Facebook seems to be using "active" as a euphemism for "engaging," rather than how many users are actually doing so monthly.

"Think about what this means for their monetization of daily users," wrote Barry Ritholtz, CEO and director of equity research at Fusion IQ, in his blog. "If they click the 'Like' button without going to Facebook that day, they cannot be sold, they do not see any ads, they cannot buy any goods or services. All they have done is used the entire platform infrastructure to tell all friends (who may or may not see what they did) that they like something online. Period."

In fact, Facebook's "Like" button, on third-party sites or via the "Facebook Connect" platform, allows users to... [Forum Column]... On the first page of Facebook's prospectus selling stock to the public, it pegs its "monthly active users" at up to 845,000,000 people. The social website reaches an even more impressive number when it comes to "daily active users": 483,000,000 people.

View all posts Article Tools Email Print Recommend Share Close Tumblr Digg LinkedIn Reddit Permalink Twitter If you managed to read all 44 pages of Facebook's prospectus, you would find that the company provides a definition of an "active user" that might be what you expect.

In December, Nielsen, which tracks internet usage, calculated 153,000,000 unique users on the Facebook site per month in the U.S., although Facebook said in its filing that it had 161,000,000 monthly active users. Assuming Facebook's U.S. traffic accounts for only about 19% of its business, that means the number is inflated by at least 40,000,000 users out of 845,000,000 that Facebook defines as "active."

Facebook's definition of "active" is not strange group-buying accounting, nor does it appear that Facebook is trying to defraud investors.

This is not the first time an internet company's metrics have come under scrutiny. In one particularly notable example, this column documented last year Groupon's discovery of a comically misleading accounting measure called Adjusted Consolidated Segment Operating Income, which included various revenues but excluded cost of sales. The Securities and Exchange Commission raised questions and the company abandoned the metric.

Facebook, which declined to comment on this column because it is in the so-called quiet period before its IPO, said its numbers "will differ from estimates published by third parties due to differences in methodology."

Back? These are some big numbers. If it's hard to believe that many people visit facebook.com every day, it's because they don't. These jaw-dropping numbers should come with an asterisk in between.

The company acknowledges, "There are inherent challenges in measuring usage across large online and mobile populations around the world," because, for example, "usage on certain mobile devices will automatically update periodically with our servers without user-initiated actions, and such activity could cause our systems to count such devices as an active Facebook user." Also, the company says, such phantom usage accounts for less than 5% of the total.

In other words, each time you press the "Like" button, for instance, you are an "active user" of Facebook. Perhaps you have a Twitter feed linked to your Facebook account? That makes you a Facebook active user, too. Do you share music with friends? You're an active Facebook user. If you log into your account and use Facebook to leave a comment on the Huffington Post site - and your comment is automatically shared on Facebook - you, too, are an "active user," even if you never spend any time on facebook.com.

Of course, this raises an obvious question: How many users are actually active under a more traditional definition?

Facebook counts as "active" users who go to its website and mobile site. But it also counts all other categories of people who don't click on facebook.com as "active users." The company considers users active if he or she "took an action to share content or activity with his or her Facebook friends or connections via a third-party site integrated with Facebook."