Snapchat released its quarterly earnings report recently and investors were disappointed by what some termed as disappointing growth. This was the company’s first financial report since it went public last month and growth rate increased only slightly.
Snap reached 166 million daily active users. This number was arrived with a growth rate of 5 percent. Compare this with the last quarter of 2016 and the company had a growth rate of 3.2 percent, which saw the company reach a daily active count of 158 million daily actives. The company’s year-over-year growth meanwhile, fell down to 36 percent as compared to 48 percent in the last quarter.
Meanwhile, Snap shares fell by 22 percent in the after hours trading. The stock is currently trading at $17.85 which nearly equal to the company’s opening price during its IPO.
In North America, which boasts of the company’s strongest consumer base, Snap added 3 million daily active users – reaching 71 million daily actives. The company added 3 million users in Europe as well, to arrive at 55 million DAUs. Meanwhile, the rest of the world saw the company add around 1 million active users. This is seriously troubling and underlines Snapchat’s need to expand in other regions as well. The company has 40 million daily active users in the rest of the world.
The company did register a good engagement from the user base it already has. Indeed, it was what Snap sought to highlight as well. Users created a many as 3 Billion daily snaps, pointing to a commendable level of user engagement. Regardless, the slow growth in user numbers is troubling — particularly since the company is now in a league that sees it directly competing with the likes of Facebook and Instagram.
As far as operating systems are concerned, Snap said that improvements to Snap’s Android application led to a doubling in the number of additional android devices on Snap’s network. Indeed, Android accounted for 30% of net additional users in the quarter. The user engagement time has somewhat improved as well and Android users contributed to an average 30 minutes daily spent on Snapchat’s app.
With more user engagement, the company can attempt to convince investors that it is capable of generating more revenue per user. However, it will have a harder time convincing investors with that tale.
However, Facebook and Instagram have definitely had an impact on Snap’s growth. The company has been countering with more new and innovative features but really, how hard is it to copy a feature and make it your own. Look at stories, Snapchat first launched it and today, Instagram Stories has more users than Snap’s whole app. The company now needs to expand as well and reach new markets, if it wants to keep competing with Facebook, Instagram and its other peers on an equal footing.
