Is Snapchat giving up the ghost?

Snapchat seems to have been everywhere this month, apart from perhaps open and in-use on user’s phones.

Snap Inc., Snapchat’s parent company, has had a tough first year since its IPO in March 2017. After jumping 44% on its first day of trading, its share price had nearly halved by the end of the year thanks to disappointing Q2 and Q3 results.

However, shares bounced back following better than expected Q4 results. They saw a 72% rise in sales, revenue was roughly $30 million higher than expected and losses were around $60 million less than projected. Things were looking up for Snap, right? Wrong.

This optimism was short lived when a Kylie Jenner Tweet from last week, in which she admitted to not using the app since its redesign, wiped a reported $1.3 billion off Snap’s market value.

So, what brought the redesign on?

According to TechCrunch, during the latter stages of 2017, the number of users posting stories had completely stagnated and only 20% of users were consuming content from the ‘discover’ section, both of which sat on the right-hand side of the app.

During the same period, Snap’s user base grew 7% and the average number of snaps each user sent per day rose to a promising 34. Snapchat’s answer to monetising this growth is by separating the social from the media, and incorporating ads into friends’ stories (on the left-hand side) as well as the discover content. Users aren’t best pleased.

User reviews of the updated UI have been far from positive, 83% of app store reviews have given the redesign just one or two stars. A petition has amassed nearly 1.3 million signatures to change it back to its former UI. And a fake (and now deleted) tweet, stating enough retweets would see the app revert to its former self, became the sixth most retweeted post of all time.

User Numbers & Revenue

The fact users feel so strongly about the redesign shows what an integral part it plays in many, notably younger, users’ lives.

eMarketer revealed a surprising 21% of the UK population used Snapchat monthly last year, not far off the 26% Instagram boasts. 61% of all UK 16-24-year-olds have used the app in the last month. Snap’s Q4 report showed the app now has 187 million daily active users (DAU) globally, an 18% increase on the same period the year prior- the highest net additions since Q3 2016.

Along with Snap’s growing user base, its average revenue per user was $1.53, up 46% year on year. Full-year revenue was $824.9 million, up 104% year on year. So again, things are looking up for Snap, right? Wrong.

Cowen analysts found that 96% of senior ad buyers would rather buy ads on Instagram than Snapchat. Most likely because Instagram has more ad formats, combined with targeting capabilities.

Last year, AdAge and RBC Capital Markets research found only 26% of advertising and marketing professionals were allocating any of their digital budget to Snapchat. Compared with 67% on Twitter, 90% on Facebook and 93% on Google.

And it’s not just ad buyers who are sceptical about the platform’s future. Maybelline tweeted its 650,000 followers, asking if it should stay on the platform after stating their views have ‘dropped dramatically’. 80% of the 7,000 voters on their (now deleted) Twitter poll voted that Maybelline migrate solely over to Instagram.

Is it all doom and gloom?

Despite all this turbulence, the long-term trends for Snap don’t look too gloomy. Its aforementioned Q4 results were better than expected and its user base grew, whilst Facebook users aged 12-17 declined by 10% in a year. Most interestingly, since the update on February 6th, downloads of the app have increased 76%- all publicity is good publicity, right?

According to Snap CEO, Evan Spiegel, content consumption and time spent on the redesigned app are “disproportionately higher for users over the age of 35” (even if this is only 27% of Snapchat users, in the UK at least). But will this be enough to keep the app on a trajectory its board are happy with? The situation is reminiscent of 2008, a time when a petition to ‘bring back the old Facebook’, gained 1 million members and a boycott looked plausible.

It would appear Spiegel is prepared for this too, stating last year “There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term… We’re willing to take that risk for what we believe are substantial long term benefits to our business.”

Snap’s future will likely remain rocky. With all the speculation, it’s easy to forget Snapchat defines itself as a camera company, and much like a camera, it must develop from a negative.