Guide to Social Media Industry KPIs

This guide highlights the key performance indicators for the social media industry and where investors should look to find an investment edge. While this guide is not a fully integrated social media industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key performance indicators in the industry. This guide will aid market participants in identifying industry trends and the potential future performance of social media companies, by region and service type.

Guide to Social Media Industry KPIs

This guide highlights the key performance indicators for the social media industry and where investors should look to find an investment edge. While this guide is not a fully integrated social media industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key performance indicators in the industry. This guide will aid market participants in identifying industry trends and the potential future performance of social media companies, by region and service type.

Industry Overview

The social media industry comprises companies that create web platforms and applications where users can connect, share ideas and content, and communicate via text, videos, and images. Social media platforms have also become popular advertising platforms for businesses and advertisers. Furthermore, these platforms are increasingly being used for social commerce, allowing businesses to engage with consumers and set up online shops to sell products. Some of the more popular social media platforms include Meta’s Facebook, Instagram, and WhatsApp; Alphabet’s YouTube; and Twitter.

Advertising constitutes a substantial proportion of the revenue earned by social media companies. While digital advertising is not limited to social media platforms, this guide specifically concentrates on social media companies. For example, Alphabet generates advertising revenue not just from its social media platform YouTube, but also from search and display advertising on Google Search. Similarly, Amazon generates advertising revenue from sponsored display ads and OTT video ads on its streaming platform, but it does not operate any social media platform, which is why it falls outside the scope of this guide.

The social media industry is constantly evolving, with new platforms and features emerging all the time. It has grown rapidly over the past decade, driven by increasing internet access, the growth of smart devices, and the rise of social commerce. As a result, social media companies have become key players in the digital economy, generating substantial advertising and e-commerce revenue. The industry is constantly evolving, as new technologies and platforms emerge and usage expands into areas such as e-commerce, content creation, and business marketing.

Industry Business Model

Revenue

The business model for social media companies typically revolves around advertising and the sale of additional features or services to users. Social media companies monetize user engagement through advertising, data collection and analysis, and partnerships with businesses and organizations. They generate revenue by displaying ads to users and charging businesses for access to user data, as well as for promoted posts, sponsored content, and other forms of advertising. Additionally, many social media platforms also offer premium features and services to users for a fee. Some also generate revenue through e-commerce, affiliate marketing, and other forms of online transactions.

We can divide the revenue generated by social media companies into advertising revenue and revenue generated from other services such as listing services, transaction services, and others. Analysts often look at active user metrics like MAUs (monthly active users) and DAUs (daily active users) to get a sense of the unique accounts that logged in or accessed a social media platform in a given time frame. DAUs are the number of unique users who visit a social media platform once within a 24-hour period. MAUs refer to the number of unique users who logged into a social media account at least once in the preceding 30-day period as of the measurement date. The average is determined by dividing the total number of active users in a specified period by the number of days/months in that period. Average MAUs/DAUs are then multiplied by ARPU (average revenue per user) to calculate the digital advertising revenue. ARPU represents the average revenue generated from each user in a given period. Finally, digital advertising revenue is added to other revenue sources to yield the total revenue generated by social media companies.

Another important metric for social media companies is the DAU-to-MAU ratio, which helps determine the social media platform’s stickiness, or the frequency with which users engage with it. In addition, impressions and eCPM (effective cost per thousand impressions) are analyzed. Impression analysis gives an estimate of revenue based on user activity, while eCPM represents the cost an advertiser pays for every 1,000 views or clicks of an ad.

Expenses

Social media companies typically incur several major expenses, including:

Selling and marketing: to increase brand awareness and acquire new users.
Research and development (R&D): to continuously improve and innovate their products and services.
Server and data center operations: to store and manage the vast amounts of data generated by users.
Employee salaries and benefits: to retain and attract top talent.
Legal and compliance: to comply with regulations and protect intellectual property.
Content acquisition: to secure content licenses and partnerships with content creators and publishers.
Infrastructure and equipment: to maintain and upgrade technology and hardware.

These expenses vary by company, and may also depend on the company’s size, revenue, and target market.

Profitability

Operating margin, EBITDA margin, and net margin are all financial metrics that analysts use to measure the profitability of social media companies.

EBITDA margin measures a company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) as a percentage of its revenue. It is a measure of the company’s operating performance and its ability to generate cash flows. A higher EBITDA margin indicates a stronger operating performance.
Operating margin measures a company’s operating income as a percentage of its revenue. It shows how much profit a company generates from its operations, after deducting its operating expenses. A higher operating margin indicates better efficiency in managing costs.
Net margin measures a company’s net income as a percentage of its revenue. It represents the company’s bottom line profitability after all expenses, including taxes and interest, have been deducted from its revenue. A higher net margin indicates better profitability and effective management of the company’s costs and expenses.

Key Social Media Industry Metrics

Key performance indicators (KPIs) are the most important business metrics for a particular industry. When understanding market expectations for the social media industry, whether at a company or industry level, some KPIs to consider include:

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Total Digital Advertising Revenue
Digital advertising revenue refers to the revenue generated by companies through the display of paid advertisements on their websites, social media platforms, or other channels. Although, we’ve focussed on social media in this guide, digital advertising revenue need not be limited to social media platforms. This revenue is typically generated through a fixed fee charged for a specific period, the number of impressions delivered, or the number of user actions such as clicks.
Monthly Active Users (MAUs)
Monthly active users (MAUs) refer to the number of unique individuals who take a specified action, such as logging in, clicking, or saving, within a 30-day period ending on the date of measurement.
Daily Active Users (DAUs)
Daily active users (DAUs) refer to the number of unique individuals who take a specified action, such as logging in, clicking, or saving, within a 24-hour period.
Average Revenue Per MAU
Revenue per average MAUs is the revenue generated by a social media company in a specific period divided by the average monthly active users (MAUs).
Average Revenue Per DAU
Revenue per average DAUs is the revenue generated by a social media company in a specific period divided by the average daily active users (DAUs).
DAU-to-MAU Ratio
The daily active users (DAUs) to monthly active users (MAUs) ratio measures the stickiness of a social media platform, that is, how often people engage with it.
Ad Impressions Growth
Ad impressions growth is the growth rate in advertising impressions on a year-over-year basis.
Total Impressions
Impressions refer to the number of times an ad or promoted post is retrieved from the server and displayed on a social network. It doesn’t indicate the number of unique users who have viewed the ad, but rather the number of times a user has seen it. For instance, if a single user sees the same ad multiple times over a certain time frame, each view is considered as one impression.
Effective Cost Per Thousand Impressions (eCPM)
Effective cost per thousand impressions (eCPM) is the cost an advertiser pays for a thousand views or clicks of an advertisement.

Visible Alpha’s Standardized Industry Metrics

To understand market expectations for the social media industry, a key information source is sell-side analyst estimates and consensus forecast data. The buy-side, sell-side, and public companies leverage this type of data to conduct competitive analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.

Visible Alpha Insights includes analyst data, company data, and industry data at a level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.

Data as of May 2023

Our integrated social media industry data set includes:

Global Tickers

490

Current Analyst Excel Models

170

Proprietary line items in our standardized operating metrics data

Contributing Brokers

214

Proprietary line items in our standardized financials data

384

Total standardized line items

Available Comp Tables – Consensus Estimates

Visible Alpha offers five social media-related comp tables, comparing forecasts for key financial and operating metrics, to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for global companies, Americas, or Europe. Every pre-built, customizable comp table is based on region, sub-industry, or key operating metrics.

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Financial and Operating KPIs Available on 22 Companies in the Industry including:

NORTH AMERICA

Meta Platforms Inc (NASDAQ: META)
Alphabet Inc. (NASDAQ: GOOGL)
Snap Inc (NYSE: SNAP)
Pinterest Inc (NYSE: PINS)
Match Group (NASDAQ: MTCH)
Bumble Inc (NASDAQ: BMBL)
IAC Inc (NASDAQ: IAC)
Yelp Inc (NYSE: YELP)
Vimeo Inc (NASDAQ: VMEO)

APAC

Tencent Holdings (HKG: 0700, OTCMKTS: TCEHY)
Baidu, Inc. (HKG: 9888, NASDAQ: BIDU)
Kuaishou Technology (HKG: 1024, OTCMKTS: KUASF)
Weibo Corp (HKG: 9898, NASDAQ: WB)
Naver Corp (KRX: 035420)
JOYY Inc (NASDAQ: YY)
Hello Group Inc (NASDAQ: MOMO)

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Industry KPI Terms & Definitions

Visible Alpha offers an innovative, integrated experience through real-time, granular consensus estimates and historical data created directly from the world’s leading equity analysts. Using a subset of the below KPIs, this data can help investors hone in on the key drivers of companies to uncover investment opportunities.

Total Digital Advertising Revenue
Digital advertising revenue refers to the revenue generated by companies through the display of paid advertisements on their websites, social media platforms, or other channels. Although, we’ve focussed on social media in this guide, digital advertising revenue need not be limited to social media platforms. This revenue is typically generated through a fixed fee charged for a specific period, the number of impressions delivered, or the number of user actions such as clicks.

Monthly Active Users (MAUs)
Monthly active users (MAUs) refer to the number of unique individuals who take a specified action, such as logging in, clicking, or saving, within a 30-day period ending on the date of measurement.

Daily Active Users (DAUs)
Daily active users (DAUs) refer to the number of unique individuals who take a specified action, such as logging in, clicking, or saving, within a 24-hour period.

Number of Subscribers/Users
Number of subscribers or users reflects the number of accounts with an active subscription and the number of registered users who took some action on the platform during a specific period.

Revenue Per Average MAUs
Revenue per average MAUs is the revenue generated by a social media company in a specific period divided by the average monthly active users (MAUs).

Revenue Per Average DAUs
Revenue per average DAUs is the revenue generated by a social media company in a specific period divided by the average daily active users (DAUs).

Revenue Per Subscriber/User
Revenue per subscriber/user is the revenue generated by a social media company in a specific period divided by the number of subscribers/users.

DAU-to-MAU ratio
The daily active users (DAUs) to monthly active users (MAUs) ratio measures the stickiness of a social media platform, that is, how often people engage with it.

Impressions
Impressions refer to the number of times an ad or promoted post is retrieved from the server and displayed on a social network. It doesn’t indicate the number of unique users who have viewed the ad, but rather the number of times a user has seen it. For instance, if a single user sees the same ad multiple times over a certain time frame, each view is considered as one impression.

Ad Impressions Growth
Ad impressions growth is the growth rate in advertising impressions on a year-over-year basis.

eCPM
Effective cost per mille (thousand) impressions (eCPM) is the cost an advertiser pays for a thousand views or clicks of an advertisement.

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