Snapchat Q1 Numbers Show Slower User Growth, Miss Revenue Estimates
So not the best day for Snap Inc.
The parent company of Snapchat has released its Q1 2018 performance report, and the numbers don’t look great. Well, on balance anyway.
First off, on usage – Snapchat added four million more users over last quarter, taking the app to 191 million daily actives.
On the surface, that may not seem terrible – the platform is, after all, still growing. But as noted by TechCrunch, the app’s growth rate has slowed to 2.13%, its slowest ever. That’s a problem for an app that’s supposedly ‘on the rise’ - for comparison, Facebook, which has been around much longer, and has far more users (and thus, should be closer to saturation point) had a growth rate of 3.42% in daily actives in its latest report.
But it’s actually worse than that – Snap CEO Evan Spiegel noted in his prepared remarks that Snap’s usage was actually lower than the average in March, in the wake of the app’s redesign, which has not gone down well with users. They’re trying to tweak the layout now, returning some of the original features, and these figures clearly show why. While the #deletefacebook movement seems to have had little, if any, impact on that platform’s usage, the pushback over Snap’s changes does seem to have slowed the app down. And the market responded accordingly, sending Snap Inc. shares down 16%.
But it’s not just in usage where Snap’s seeing trouble – the company also posted a $231 million revenue result for the quarter, down on market estimates of $244 million.
As you can see, North America remains by far Snap’s biggest revenue source - where the platform added just one million users in the period.
The revenue per user stats also look bleak.
Snapchat has long noted that its biggest strength is in engagement – in a recent report comparing the platform against rivals Facebook and Instagram, Snap noted that they see far more engagement among younger users, with daily active Snapchatters spending over 30 minutes per day in app.
And few would debate Snap’s hold on younger audiences – but the problem from a business perspective is that Snap needs to show how that engagement translates to actual brand benefit. Average revenue per use stats falling almost across the board don’t help their case.
And despite recently cutting over 120 staff, Snap’s operating costs have barely shifted from last quarter.
Granted, those cuts are probably too recent to impact this period, but it does highlight why such actions were necessary. The company’s bottom line isn’t in the best shape, with seemingly few bright spots on the horizon.
So where does Snap go from here? With Facebook putting the squeeze on at every turn, it’s difficult to see the app returning to its former momentum, and becoming a serious challenger in the space. As noted, reaching younger users is their key niche, but the figures here may indicate that younger audiences simply aren’t as lucrative, which may cause more headaches down the road.
Of course, the company has just released a new version of Spectacles, and there is significant potential in bringing a future AR-enabled version of the device to market. But thus far, that hasn’t been on the cards – Snap could possibly be close to doing this, to taking that next step, but the latest glasses are unlikely to excite investors too much, given the minor upgrades provided.
Other than that, Snap’s ad tools are getting more advanced, and they’ve just released their new Story Ads.
Will that be enough to get the numbers back on track? Safe to say the latest AR announcements from Facebook, coming out of their F8 conference, have not made Spiegel and Co. any more comfortable.
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