Snapchat loses 2M more users and shares sink despite business growth – BerTTon

Snapchat continued to shrink in Q3 2018 but its business is steadily improving. Snapchat’s daily active user count shrank again by 1 percent to 186 million, down from 188M and a negatve 1.5 percent growth rate in Q2, though user count is still up 5 percent year-over-year. Snapchat earned $298 million in revenue with an EPS loss of $0.12, beating Wall Street’s expectations of $283 million in revenue and EPS loss of $0.14 with a loss of a half a million users.

Snap entered earnings with a $6.99 share price, close to its $6.46 all-time low and way down from its $24 IPO opening price. Snap lost $325 million this quarter compared to $353 million in Q2, so it’s making some progress with its cost cutting. That emboldened Wall Street, which pushed Snap’s share price up 8.3 percent to around $7.57. The stock had been so heavily shorted by investors that even with the user count drop, it only needed modest growth in its business for shares to perk up.

In his prepared remarks, CEO Evan Spiegel admitted that “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.” Now down to $1.4 billion in cash and securities, Snap will need to start reaching some of those users or improving monetization of those it still has to keep afloat without outside capital.

An Uphill Battle

Q3 saw Snapchat’s launch its first in-house augmented reality Snappable games, while plans for an third-party gaming platform leak  It launched Lens Explorer to draw more attention to developer and creator-built augmented reality experiences, plus its Storyteller program to connect social media stars to brands to earn sponsorship money. It also shut down its Venmo-like Snapcash feature. But the biggest news came from its Q2 earnings report where it announced it’d lost 3 million users. That scored it a short-lived stock price pop, but competition and user shrinkage has pushed Snap’s shares to new lows.

Snapchat is depending on the Project Mushroom engineering overhaul of its Android app to speed up performance, and thereby accelerate user growth and retention. Snap neglected the developing world’s Android market for years as it focused on iPhone-toting US teens. Given Snapchat is all about quick videos, slow load times made it nearly unusable, especially in markets with slower network connections and older phones.

Looking at the competitive landscape, WhatsApp’s Snapchat Stories clone Status has grown to 450 million daily users while Instagram Stories has reached 400 million dailies — much of that coming in the developing world, thereby blocking Snap’s growth abroad as I predicted when Insta Stories launched.. Snap Map hasn’t become ubiquitous, Snap’s Original Shows still aren’t premium enough to drag in tons of new users, Discover is a clickbait-overloaded mess, and Instagram has already copied the best parts of its ephemeral messaging. Snap could be vulnerable in the developing world if WhatsApp similarly copies its disappearing chats.

At this rate, Snap will run out of money before it’s projected to become profitable in 2020 or 2021. That means the company will likely need to sell new shares in exchange for outside investment or get acquired to survive.

Source TechCrunch https://ift.tt/2RfoqEJ

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