Snapchat is losing users - but revenue is up

Snapchat's redesign was met with considerable anger earlier this year, with 1.2 million users signing a petition opposing the redesign. The impact of that anger was revealed on Tuesday with Snap Inc (Snapchat's parent company) confirming in a prepared Q2 earnings call statement that Snapchat had dropped from 191 million to 188 million daily active users in a quarter. However, CEO Evan Spiegel countered this 2% drop by revealing that Snapchat's monthly active users are actually growing in number.

However, despite losing users, Snap Inc. has seen impressive results in terms of revenue. Year on year, revenue has grown 44% - in Q2 2017 it was 182 million up to 262 million in Q2 2018. That's 44% growth. 

Snapchat's redesign was a gamble

Clearly, Snapchat's decision to redesign its platform was a gamble - whether or not it will pay off isn't immediately clear.

The trade-off is one between a design that users had grown to love and making the platform more friendly to advertisers and publishers that want to reach those users.

This is something Spiegel recognizes in his statement:

We feel that we have now addressed the biggest frustrations [about the redesign] we’ve heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people. For example, the number of people that watch Publisher Stories and Shows on iOS every day has grown by more than 15 percent this year, and we are excited to bring the learnings from our iterations on iOS to our Android application. Additionally, more Snaps from Publisher Stories and Shows were viewed in July than any other month in our history.

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You might say that this is now a critical moment for Snap Inc. This could just be a blip as it moves to grow its revenue streams with a more publisher-friendly platform. But equally, this might be an indication that users are beginning to fall out of love with Snapchat.

This is all good news for Instagram, who might now smell blood as it appears to be moving from strength to strength in the battle for audience share.

Is Snapchat's case unique in the social media world?

To a certain extent, Snap's challenges aren't actually that unique in the context of social media companies.

At the end of July, for example, Facebook shares fell 20% after its average daily visitors missed analyst projections. Twitter has also been in a similar situation with its market value struggling.

However, one analysis put forward by Bloomberg suggests that Snapchat is having an identity crisis. Having "defined itself in opposition to the internet establishment," the platform is now "borrowing liberally from the internet conventions it has scorned." These 'conventions' are those design tactics deployed by platforms to drive revenue through advertising.

We'll just have to wait and see how this identity crisis evolves, and what Snap Inc. decides to do next.

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