Snap unveiled its Q3 financial results to signs that while the company’s core business is steadily improving, users are continuing to abandon its core Snapchat app, risking the firm’s main selling point to investors and sending shares to their lowest value yet.
Snapchat’s DAU count was down 1 per cent quarter-on-quarter, dropping to 186m. That follows a 1.5 per cent loss in daily active users in Q2, although the user count is still up five per cent year-on-year. The company projects that it will continue to lose users next quarter, and has also seen a drop in average revenue per user in the developing world, although made strong gains in this regard in the US and Europe.
“While we have incredible reach among our core demographic of 13- to 34-year-olds in the US and Europe, there are billions of people worldwide who do not yet use Snapchat,” said CEO Evan Spiegel in his prepared remarks. “Continuing to improve our user experience and creating awareness about our value proposition are key drivers in growing our community.
“Over the past two years, we have transformed our advertising model to self-service and we are now beginning to see the results. Trailing 12 month revenue has grown over 50 per cent and now exceeds $1bn, as we continue to scale our business and deliver value to advertisers.”
Q3 saw the firm bring in $298m (£232.4m) in revenues for an earnings-per-share loss of $0.12, although this beat Wall Street’s expectations of $283m. The progress the firm has made in cost-cutting saw shares briefly jump when earnings were announced, but this was largely due to heavy shorting by investors, meaning that only modest growth was needed to cause a bump. In after-hours trading, the firm’s shares dropped 9.3 per cent in price, crashing to an all-time low of $6.31.
“Highlighted by these figures is the battle Snap has on its hands in the face of increasing competition, particularly from Instagram,” said Sophie Light-Wilkinson, vice president of marketing for EMEA at Bazaarvoice. “According to consumer reports, Instagram has already overtaken Snapchat as the most used social media app among US teens following reports earlier this year that for the first time the number of people using its service on a daily basis had dropped. The lingering feeling for advertisers is this Snap audience does not offer the same ad potential as other social platforms.”