Snapchat scores first earnings beat with revived user growth
Snapchat is starting to turn things around, boosting its sluggish user growth rate and beating Wall Street’s expectations for the first time with today’s Q4 2017 earnings report.
It added 9 million daily active users to reach 187 million with a quarter-over-quarter growth rate of 5.05% percent in Q4, compared to 2.9 percent in Q3. Revenue was $285.7 million, with earnings per share of -$0.13 adjusted compared to estimates of $253 million and a -$0.16 adjusted.
We’ll hope to hear more about Snapchat’s big redesign that was due to be fully rolled out by now but that has been delayed following poor reception in countries like the UK, Australia, and Canada. Amongst some of the first users to review the update, 83 percent of App Store reviews were negative, citing a confusing interface, ads mixed into the message inbox via Stories, and people who don’t follow you back getting pushed into the Discover section.
Making Snapchat more competitive with its army of clones could be difficult as top talent keeps leaving the company. VP of product Tom Conrad, one of CEO Evan Spiegel’s top lieutanents left in January following TimeHop founder Jonathan Wegener and others.
Snapchat acquired adtech startup Metamarkets for under $100 million in Q4, which could help it squeeze more revenue out of its existing users since the total number isn’t growing quickly any more. Snap also launched a new “hands-on augmented reality” ads where you can interact with a brand’s products. But we might need to wait until Q1 to see the impact of these on revenue. Snapchat is expected to generate $1.18 billion in US ad revenue in 2018, up 83 percent over last 2017. That would give Snapchat a 1.3 percent share of the US digital ad market.
In the meantime, Snapchat has been racing to release new features to keep users loyal despite the onslaught of competition from Facebook’s Instagram and WhatsApp. Snapchat launched Bitmoji 3D world lenses where your personalized avatar dances in your Snaps, and an augmented reality platform for geolocated art in Q4. But at it’s core, Snapchat has to find a way to become indispensable to users in the face of Instagram’s convenience.
