Facebook's funny accounting has "active users" who never use Facebook

The NYT's Andrew Ross Sorkin quotes Barry Ritholtz's digging into how Facebook's IPO documents define "active" users and finds that many of them may never visit the site. Facebook counts you as "active" if your only involvement with the service is setting it up to republish your Twitter feed, or if you click "Like" buttons but never log in to the actual service. This should matter to investors, since Facebook earns no advertising revenue from those users, though it may earn some other income by reselling the private details of their browsing habits as gleaned from its tracking cookies.

In other words, every time you press the “Like” button on NFL.com, for example, you’re an “active user” of Facebook. Perhaps you share a Twitter message on your Facebook account? That would make you an active Facebook user, too. Have you ever shared music on Spotify with a friend? You’re an active Facebook user. If you’ve logged into Huffington Post using your Facebook account and left a comment on the site — and your comment was automatically shared on Facebook — you, too, are an “active user” even though you’ve never actually spent any time on facebook.com.

“Think of what this means in terms of monetizing their ‘daily users,’ ” Barry Ritholtz, the chief executive and director for equity research for Fusion IQ, wrote on his blog. “If they click a ‘like’ button but do not go to Facebook that day, they cannot be marketed to, they do not see any advertising, they cannot be sold any goods or services. All they did was take advantage of FB’s extensive infrastructure to tell their FB friends (who may or may not see what they did) that they liked something online. Period.”

Those Millions on Facebook? Some May Not Actually Visit (via Memex 1.1)