Snapchat continues to disappoint, missing investor’s expectations on revenue and user growth. Snap shares have fallen over 15% in the quarter to date. Could company plans to dramatically redesign the app help boost growth?

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Snap Inc., the parent company of image messaging and multimedia mobile application Snapchat, continued to disappoint as a listed company as they missed investors expectations in terms of revenue and user growth. Snap has fallen over 15% in the quarter to date.

In 3Q 2017, Snap delivered earnings of US$207 million (up 62%) but its losses expanded much faster, losing US$443 million in the quarter, nearly four times the amount of cash it burned during the same period in 2016. Snap wrote down US$40 million in unsold Spectacles. Snap reported a count of 178 million daily active users, up 17% year over year, and it has 4.5 million more daily active users than it did last quarter.

Snapchat-spectacles

Snap’s ‘Spectacles’ are sunglasses that snap, capture and share video in the moment from the perspective of Snapchat users. Sales in ‘Spectacles’ haven’t taken off as planned for the company.

 

Snap’s efforts at automating their ad business have gained traction this year, with 80% of Snap ad impressions delivered programmatically in 3Q 2017, up from 0% one year ago. Although the speed of this transition surpassed company expectations, it has dramatically reduced pricing as advertisers move from direct sales to unreserved auctions. This has ultimately decreased CPMs (i.e. Cost per Thousand Impressions) more than 60% year over year, which has made it harder for Snap to grow revenues at the rate they would have liked.

Reports have indicated that public mentions and downloads of Snapchat have fallen steadily since the company went public in March 2017. Both WhatsApp Status and Instagram Stories have now passed Snapchat in size, with over 300 million monthly users each. Snap says that its planning to start paying top creators to incentivise its top users, creating a virtuous cycle it hopes will attract more users.

According to Snapchat Co-Founder and CEO Evan Spiegel:

“The company plans to dramatically redesign the app will make it easier for users to understand, a move Snap hopes will boost growth.”

 

About Kevin Hua

Kevin Hua is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kevin has over 19 years experience in financial markets including as Senior Portfolio Manager at Atrium Investment Management and Stark Investments.