Snapchat, the shiniest new object in social media (at least as far as publicly-traded companies go), held its second earnings call since its initial public offering (IPO) recently, and the news from the yellow ghost isn’t great. Let’s dig into what Snapchat had to say.

User Growth

Snapchat reports its userbase by quarterly averaged daily active users, meaning the number of users who are active daily on average throughout the quarter.

This is the number that has investors worried. Snapchat’s growth rate tapered off to a lukewarm 4.22% quarter-over-quarter rate. That number isn’t great at all, especially given that it’s decelerating.

While search trends aren’t necessarily indicative of app usage, investors are right to be concerned that Snapchat’s search volume has remained relatively stagnant during the same period that Instagram’s search volume has steadily increased:

For clarity, Facebook’s search volume was not included because it dwarfs everything in the chart.

Revenues

Snapchat’s revenue bounce back from the traditional Q1 slump was solid:

However, compared to last year’s Q2 bounce, this year’s bounce is muted. What’s more telling is the average revenue per user, ARPU:

What we see is that Snapchat’s ARPU is on par with Q4 of last year, the holiday season. This is generally a good indicator, a sign that it’s continuing to drive value from its users. Every other social network would love to have the same value per user in Q2 that it did in the previous Q4, when holiday ad spending is at its highest. However, Snapchat’s ARPU is still far below the gold standard of $2/user. We’ll be looking very closely to see if it continues to grow in the second half of 2017.

What do these results mean?

Snapchat needs to show the world a shock, a stunning result. It either needs a massive explosion in user base or monetization numbers that far exceed its current performance in order to convince investors and marketers that the platform is viable in the long term.

What should marketers and communicators do?

One feature worth experimenting with is Snapchat’s newly-launched self-service ad platform. As long as our audience is the Snapchat audience, this ad platform might be worth testing to see how it performs against more traditional digital ad platforms for the 13-30 audience. New direct-response options have potential to generate leads at relatively low cost, as long as the audience we’re seeking to convert is the Snapchat demographic.

Overall, Snapchat should be a case-by-case choice for marketers and communicators. If we have an audience which is strongly aligned to Snapchat’s demographics and user base, by all means, focus on it as a strategic channel. However, for everyone who doesn’t cater to the Snapchat crowd, it’s probably safe to create content for Instagram and then just copy over content as appropriate to Snapchat. Virtually every feature and innovation that Snapchat brought to market, Facebook has copied into Instagram. Arguably, many of the implementations in Instagram are improvements on the original Snapchat concepts.

We’ll continue to keep a close eye on Snapchat over the coming months to see if its fortunes improve.

Christopher S. Penn
Vice President, Marketing Technology

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