Snapchat comeback: Chat app beats estimates and stems decline in users

08/02/2019

Despite a tough year for the company and intense competition from the likes of Instagram and TikTok, Snap latest results seem to indicate a resurgence for the platform.

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The company posted a narrower-than-expected loss for the fourth quarter as it managed to stabilise its base and prevent more users from fleeing Snapchat, the company's social app.

"We ended the year with user engagement stabilizing and have started rolling out the new version of our Android application to a small percentage of our community," CEO Evan Spiegel said on Tuesday in a statement.

Snap was able to maintain its user base at 186 million daily active users, flat from the previous quarter. Analysts were expecting the company's user base to continue shrinking as it had over the past two quarters.

The promising results come at a crucial time for the Los Angeles tech company, which had a rough fourth quarter.

The company saw rival Instagram emerge as the most popular social platform among teenagers, according to Piper Jaffray report in October. This change in ranking has coincided with a continued decrease in Snapchat's user base.

Snap this quarter also dealt with a number of key executive departures, including that of Chief Financial Officer Tim Stone, who the company announced last month will be leaving the company. Stone joined Snap less than a year ago.

Analysis

Yuval Ben-Itzhak, CEO, Socialbakers, said: “Snap's positive Q4 results are a great sign for the company and its future. Despite the tough competition coming from Facebook's family of apps as well as new platforms like TikTok, Snap's results show that is still has considerable appeal to marketers and users alike.

“As we noted in the past, Snap should open its platform for buyers and tech partners in order to drive growth. The fact that Snap has given marketers more self-service tools, as well as the ability to buy their own ad space through programmatic channels, is definitely having a positive impact on their bottom line and their community engagement overall.

“Facebook's earnings last week clearly indicated that advertisers are focusing more on Stories as that's the format that users engage with the most. It is also a format that Snap invented, meaning they are in as good a place as any platform to attract brands looking to use Stories to engage with the younger demographic.”

Josh Krichefski, CEO of MediaCom UK, said, Snapchat have continued to compete with their rivals by continuing to develop clever innovations.

“Despite a challenging year for Snap in 2018, these latest results paint a much brighter picture for the company,” said Krichefski. “A combination of a boom in online advertising (the latest ad spend figures saw mobile record a growth rate of 23.6% year-on-year in Q3 2018) as well as continued innovation and investment in partnerships have proved to be a real boon. One of its problems has been remaining relevant to its younger audience – yet according to Ofcom, children aged between 12-15 are using Snapchat more now than they ever have done. Its biggest challenge, however, is gaining a slice of the slightly older audience now turning their heads to other forms of social media, notably Instagram.

“To combat this, Snapchat cleverly partnered with Amazon last year to allow users to scan and purchase products instantly. It was a necessary reaction to Instagram’s social shopping function and Pinterest’s product tagging tool to keep audiences’ attention for longer than 10 seconds or 24 hours and move into a sort of eCommerce model increasingly found on social media. The initial model that Snapchat was solely built on has massively shifted with brand partnerships and leading news sites like Sky News valuing the opportunity to connect with a younger target market. It’s this exact focus on the audience, what they want and how to best appeal to them, that will be key for the platforms and also the advertisers. Snap will need to continue innovating this year to not just react to its competitors, but force their hand and be the prime mover instead.”

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