Why DAUs And MAUs Don't Matter For Netflix

For a handful of companies, revenue and earnings numbers will be an afterthought this earnings season. Netflix, Inc. NFLX will likely be one of those companies. With the company investing heavily in original content and international expansion, Netflix’s first-quarter earnings may not reflect much in terms of the company’s long-term potential. Instead, traders will be watching Netflix’s subscriber count closely.

More Than DAUs And MAUs

Revenue and earnings may also be an afterthought for social media companies like Twitter Inc TWTR and Snap Inc SNAP, which will likely react primarily in response to the companies’ number of monthly active users.

For social media companies like Twitter, Snap and Facebook Inc FB, user engagement is a central part of their business. That engagement is the reason why the companies report active users rather than total subscribers.

Twitter and Snap’s business relies on advertising, whereas Netflix’s business relies on subscriber fees. For social media sites, the amount of time users spend on the platform correlates directly with the rate they can charge advertisers.

As long as Netflix subscribers are paying $7.99 and up per month for a subscription, shareholders don’t care whether subscribers are watching 10 or 1,000 hours of programming each month.

In terms of user engagement, Netflix only cares that users are engaged enough with the product to maintain their subscription. Of course, the happier and more engaged a customer is with the product, the more likely he or she is to spread the word to friends and family. But since Netflix customers are charged by the month and not by the hour, shareholders don’t particularly care about how user engagement metrics like MAUs.

Related Links:

Amazon Grabs 'Thursday Night Football' Streaming Rights, Another Blow For Twitter

Netflix Higher Ahead Of Q1 Report

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