Snap Inc (NYSE: SNAP): Bleeding Users
In the second quarter of the year, Snap Inc (NYSE: SNAP) reports a drop of about 3 million people who actively use its app. In contrast, the numbers were on the opposite side in the same quarter last year. The United States and Canada are the greatest contributors to the drop. The company has the largest following in North America. Similarly, there is a significant drop in Europe. Interestingly, these negative reports seem to have had a minimal impact on the total revenues of the company during the same period.
Snap Inc., Snapchat’s holding company has in the past established a reputation as anti-establishment. The company has stuck to a different advertising model for a long time since its launch. The company has had a strict policy that requires its media partners to produce ads that are of superior standards. As a result, Snapchat has seen approximately 75% of its revenue coming from advertisers. Lately, however, the company has had to borrow heavily from the other internet applications’ shoddy and inferior ads that promise more revenue. The anti-establishment energy is gradually fading.
The company conducted an upgrade of the app, which changed the user interface and much of the appearance of content. According to a video call by the Snap, Inc. CEO, Evan Spiegel, the aim was to separate the personal messages of the users from content that comes from celebrities and brands. Clearly, the move was not the best. Many users complained about this move on other social media platforms.
The New York Times reports that the recent drop in users and revenue of Facebook and Twitter were as a result of market saturation. In contrast, Snapchat has been able to sidestep these issues. The disappearing messaging app has been able to rake in profits even as other social media giants reported losses. However, the company has reported a very significant user decline, which it has blamed on the redesigns that it previously undertook. In rebuttal, the Snapchat management has insisted that there has been an increase in its monthly user base. Analysts have doubted the motive of this disclosure, which is being done for the first time. They claim that it may be a distraction from the main focus. The analysts have insisted that Snapchat may not be as engaging as previously thought. For this reason, users may be ditching Snapchat for other more engaging social media platforms. Consequently, the advertisers will also follow suit. This is because the advertisers are the suppliers while the users are the customers.