Why Facebook and Twitter Continue to Get Bigger

NEW YORK (TheStreet) –– As the world turns increasingly mobile, both Facebook (FB) and Twitter (TWTR) continue to be huge beneficiaries of time spend, and it's only getting bigger.

According to the July U.S. multi-platform traffic data report from comScore, Twitter added the most unique visitors, with uniques growing 3.9% month over the month to 121.6 million. Facebook continues to hold the lead, with 205.6 million unique visitors, up 1.3% month over month to 205.6 million. This shows the power of both platforms as an advertising tool, notes Cantor Fitzgerald analyst Youssef Squali. "We expect growth in both users and usage to continue to drive top-line outperformance, resulting in well above-industry growth rates for the foreseeable future," Squali wrote in the note. He has an $82 price target on Facebook.

Facebook now has over 1.3 billion monthly active users (MAUs), with 1.07 billion on mobile. Though those numbers are impressive, the company's daily active users (DAUs) is where the company's enormous reach for advertisers becomes valuable. At the end of the second quarter, it had 829 million DAUs, and 654 million mobile DAUs, an increase of 39% year over year. Facebook has transformed itself into a mobile-first company, generating more than half of its advertising revenue from mobile.

For the second-quarter, Facebook earned 42 cents a share on $2.91 billion in revenue, as revenue from advertising was $2.68 billion, a 67% increase year over year. Mobile advertising revenue rose rose 41% year over year, accounting for 62% of total advertising sales, coming in at $1.66 billion.

As a result, investors have responded in kind to Facebook's momentum, sending shares 37.4% higher this year, compared to a 8.3% gain in the NASDAQ.

By contrast, Twitter is much smaller in scale, but revenue growth is outpacing the industry, even if user growth is still tepid. Though Twitter, by traditional MAU and DAU metrics is much smaller, its reach is increasing, a trend Squali noted, "show[s] positive momentum for social players." Squali reiterated his $58 price target on Twitter.

The company clearly benefited from the World Cup (an event that only happens once every four years), though CEO Dick Costolo attributed the user growth in the second quarter more to the product changes. The question surrounding Twitter has never been about profitability, but about whether it's a mainstream product, which performance in the quarter helped demonstrate.

"Twitter is everywhere," Costolo said on the second quarter earnings call. "It's all over TV. When the NBA commissioner gets on TV and talks about sanctions about Donald Sterling, there are tweets all over the screen. This is all happening on Twitter."

Costolo noted that Twitter's reach (MAUs plus unique logged out visitors) is two to three times what its monthly MAU number is, but the company is really only monetizing its MAUs. Costolo hinted that further monetizing its reach would be coming down the line, but not anytime soon.

Twitter earned on a non-GAAP basis 2 cents a share on $312 million in revenue, as it ended the quarter with 271 million MAUs, up 24% year over year. It had 211 million mobile MAUs, up 29% year over year at the end of the quarter.

Since the earnings report, Twitter shares have gained 18.6% since July 29th, outpacing the the 0.18% return in the S&P 500.

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