Snapchat, the shiniest new object in social media (at least as far as publicly-traded companies go), held its third earnings call since its initial public offering (IPO) recently, and the little ghost is struggling. Let’s see what the company had to report.
Snapchat reports its userbase by quarterly averaged daily active users, meaning the number of users who are active daily on average throughout the quarter. In Q3, its rate of growth dropped:
From 4.22% quarter-over-quarter growth to 2.89% growth, Snapchat clearly showed signs that its growth phase is over. This growth number is also psychologically important because it’s below Facebook’s quarter-over-quarter growth number – and Facebook has nearly complete market saturation.
Digging in more thoroughly, Snapchat’s growth was flat in North America, while it was sharply down in the rest of the world.
Snapchat’s revenue declined quarter-over-quarter as it had in the previous year between Q2 and Q3:
This loss is contrary to its social media competitors; both Facebook and Twitter notched modest revenue growth in Q3. In the earnings call, Snapchat CEO Evan Spiegel attributed the loss to rapidly declining advertising costs; cost per thousand impressions dropped rapidly as the platform became more programmatic and self-service.
Snapchat’s struggles with ad dollars is reflected in its rapidly decelerating average revenue per user (ARPU):
Compared to Twitter ($1.50 ARPU) and Facebook ($4.90), Snapchat is leaving lots of money on the table.
The holiday season in Q4 is Snapchat’s make-or-break quarter. If they don’t crush it this holiday season, investors may give up on the company entirely.
What Should Marketers and Communicators Do?
Snapchat’s new ad platform and low prices mean that if your audience (mostly 18-34 year olds) is on Snapchat – a select demographic – then by all means take advantage of its low prices to advertise on the cheap.
However, Snapchat should no longer be a core part of your social media strategy if you don’t primarily serve the 18-34 year old market. Many of its features and most of its users are also available on Instagram; Instagram’s survival and success seems far more assured as part of the Facebook family than Snapchat’s struggles. Create content with an eye towards reuse on Snapchat, but create principally for Instagram first.
Snapchat needs to show its viability in Q4; if they don’t, prepare to throw in the towel on the platform.
Christopher S. Penn
Vice President, Marketing Technology