Snap Inc. Q3 revenue reached new heights, but users keep leaving
The number of daily active users on the app dropped from 188 million in Q2 to 186 million in Q3.
Snap Inc. released its third-quarter earnings results on Thursday, reporting revenues of $297.6 million for the quarter — a 43 percent jump year over year, and new record. However, the company reported a loss of two million daily active users (DAUs) from last quarter, dropping to 186 million in Q3.
Snap’s gradual revenue growth. At nearly $298 million in revenue, the third-quarter marked record revenue for Snap, exceeding its Q4 2017 revenue of $286 million.
Through Q3, Snap has generated $791 million in revenue this year. The company estimates Q4 revenues of $350 to $380 million, which even at the low end would put the company over the $1 billion mark for the year.
Snapchat investment in ads. Snapchat’s revenue gains are likely tied to the focus it has put on monetization efforts. So far this year, the company has introduced a number of new ad options and features to help boost e-commerce on the app. It has continued to build out its programmatic offerings via the self-serve ad tool it launched in 2017, and expanded available insights for advertisers within the Snapchat Ad Manager.
“We’re investing in long-term growth opportunities and driving operational efficiencies, ” said CFO Tim Stone in the release announcing the company’s Q3 financial results, “We achieved record revenue and strong bottom-line results this quarter and expect a record fourth quarter as we continue to invest in innovation for our community and scale our business.”
Daily active users dropping. Snapchat’s long-term growth plans appear to be working on a revenue front, but its struggling to keep users. DAUs dropped for the second quarter in a row. In Q1, Snapchat reported 191 million DAUs — representing, at least, four quarters of consistent user growth. But the company saw DAUs drop to 188 in Q2, down three million from the previous quarter, and now 186 million in Q3 — five million less than reported during the first quarter of the year.
The company has attributed its loss in DAUs to the major redesign of the app that began rolling out at the start of 2018 that largely impacted Android users.
“As we have mentioned on our past two earnings calls, a change this big to existing behavior comes with some disruption, especially given the high frequency of daily engagement of our community,” said CEO Evan Spiegel during the company’s Q1 2018 earnings call, “Given the volume of changes we made with the redesign, a number of performance regressions contributed to a disproportionately negative impact among Android users, and we are currently working on addressing them.”
It has been nearly six months since that call, but user growth is not happening. On Monday, a report from research firm PiperJaffray showed Instagram now leads Snapchat when it comes to teenage users. While Snapchat is often associated with younger audiences — Snap reports more than 50 percent of its daily new users in the U.S. are 25 years or older, and nearly one-third of adult users are parents.
Why it matters to marketers. The market isn’t responding well to Snap’s user numbers (the stock was off nearly 14 percent at the time of publication), but if Snapchat can finally address its Android app woes it may stem the loss of users. With its advertising picture is looking surprisingly brighter, it may get marketers to take another look.
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