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Is Snapchat Dying?

Is Snapchat Dying?

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What Snapchat’s Slowdown Means For The Future

With Snap’s IPO comes new information about the company’s revenue, profitability, and growth. Though the Snapchat narrative has thus far been one of meteoric rise and unprecedented engagement on an innovative platform that has a younger audience creating and engaging with content in a novel way, that narrative may well be shifting. Growth on Snapchat slowed dramatically at the end of 2016 and as other apps (most notably Instagram) mimic Snapchat’s key features, it begs the question: Is Snapchat as healthy as it was six months or a year ago? Does its underwhelming growth hint at big trouble for the platform?

And is Snapchat really dying?

Snapchat affected by Instagram Stories

via App Annie

How Instagram Stories Crippled Snapchat

In August, Instagram launched Stories, a feature that allows users to show pictures and short videos that disappear after 24 hours on the app. Instagram Stories essentially function the same way as Snapchat Stories. With new functionality opened up on an app that already outpaced Snapchat in audience, Instagram seemed to pose a serious threat to Snapchat, and that’s immediately obvious in the numbers.

Following the launch, Snapchat’s growth in daily active users (DAUs) slowed in a big way. Typically reporting pretty impressive QoQ growth numbers since 2014, the Q3 to Q4 2016 growth was its most modest growth percentage at 3.2%. The impact of Instagram Stories was seismic, slowing Snapchat’s growth by 82%Recode broke down the overall change in DAUs on Snapchat QoQ, finding that Snapchat had seen significant and steady gains in DAUs since Q3 2015. But that growth stumbled in a big way in Q3 of 2016. Q2 2016 saw a Snapchat DAU increase of 21 million, but it fell sharply to an increase of just 10 million in Q3 and 5 million in Q4.

It’s not all doom and gloom, though. In its S-1 filing, Snap said that its December numbers were better than the first two months of Q4, possibly signaling some regained ground. App Annie’s analysis of app downloads seems to support this outlook, too, showing a major dip in app download rank in August. Snapchat’s rank remained low for several months, but began looking up toward the end of October (maybe due to Spectacles buzz and renewed interest). Since then, it’s trended a bit lower than pre-Instagram Stories numbers, but doesn’t show the steep drop-off that might spell the immediate end of Snapchat as we know it.

It’s difficult to say whether or not this downward trend in growth will hold, but it’s highly doubtful that competition is going to let up anytime soon. Snapchat’s success going forward is going to depend on its ability to set itself apart, to draw influencers and brands in higher numbers than its competition, and to find a way to draw new users to the platform.

Related Post: Instagram Stories vs. Snapchat Stories—Top Influencers Surveyed List Their Favorite

Instagram Stories Aside, What Else Is Slowing Snapchat's Growth?

There’s no arguing that the single most pivotal factor in Snapchat’s slowing growth is Instagram Stories (increased competition in an already crowded marketplace has a huge impact). But it likely wasn’t the only factor that led to the slowdown. Snapchat attributes some of the growth stall to “diminished performance” of the application due to new features and updates, but it’s worth considering that this might also have something to do with saturation.

It’s similar to what Twitter's encountered — the problem of drawing new users beyond something of a perceived tipping point. Though Snapchat may not struggle with Twitter’s unique problem of being something of a challenging platform to understand and find beneficial for new users, it’s hard to argue that Snapchat has, by and large, arrived. Much like Twitter, those who want it likely have it by now, and it’s likely going to take something — be it a feature, some kind of exclusive content, or some product or service external or supplementary to Snapchat — to draw users in droves again the way it did before Instagram Stories. Cross-posting the same type of content across platforms is a pain, so if users can streamline the process by using Instagram alone to achieve comparable results, they likely will.

Related Post: Did Snapchat Kill Off Vine?

Brands & Influencers On Snapchat

The vast majority of Snap’s revenue comes from advertising on Snapchat. And though DAU growth has slowed in recent months, Snapchat’s revenue skyrocketed from 2015 to 2016, rising from $58 million to $404.5 million by the end of 2016.

That said, Snap still isn’t profitable. It lost $514.6 million in 2016, and it faces significant obstacles on the path to profitability. If Snap is going to become profitable, it’ll require continued growth in its user base and a clear commitment from the influencers and brands that are key to its success. Snapchat saw an average of 158 million daily active users by the end of Q4, a relatively modest gain over Q3’s reported 153 million, and though that user base is very engaged and provides a significant audience for influencers and advertisers, Recode reports that Instagram has 400 million daily active users to Snapchat’s 158 million.

It’s not difficult to see why influencers and brands might prefer Instagram’s wider audience and added functionality of photos that stick around for longer than 24 hours. In a survey of four popular influencers, Mediakix discovered that these influencers found Instagram to be the largest and fastest growing platform at the end of 2016. And though they were split on preference between Snapchat and Instagram, Instagram was the clear winner for engagement and audience opportunities.

They’re not the only ones seeing it. Techcrunch spoke to influencers, talent managers, and analytics providers and found that since Instagram launched Stories, view counts on Snapchat Stories have fallen off dramatically, with most reporting drop-offs of 15-40%. For those influencers with followings that span platforms, it stands to reason that posting on Snapchat while view counts dip and growth stagnates might become more and more difficult to justify.

For Snapchat, holding onto or capturing a clear preference in its influencer and advertiser base will likely be vital if it’s going to stave off decline. Whether this comes by way of new features, better performance, or unique engagement opportunities not yet offered or replicated by other platforms, Snapchat will need to prove why it’s still a vital part of the social media arsenal when its key features exist in other apps with larger audiences.

The Future of Snapchat's Growth

It’s important to note that Snapchat is still growing. It’s just not growing as much, (which, for a company that just filed its IPO, is kind of a problem), but it is still growing. It’s not as if Snapchat’s entire user base has suddenly abandoned ship for Instagram. What we’re seeing is a significant downturn in growth — one that’s going to require Snapchat to do something bigger and better in order to hold or regain ground. Spectacles have shown early signs of success, but in order to establish itself as a platform and a company that offers something wildly better and different than Instagram or similar competitors with comparable disappearing message features, Snap will need to follow through on the idea that it’s a “camera company”, not just an app or social network.

As it stands, with no new features, no improved functionality, and no peripherals that change content creation within the Stories space in a major way, it’s hard to imagine Snapchat winning the fight against Instagram, at least from a growth perspective. Instagram is bigger. It offers more to users in terms of variety of features and potential audience, and its Explore feature is drawing almost 2/3 as many daily active users as Snapchat’s entire platform at 100 million.

Snapchat doesn’t necessarily need to reinvent, but it will likely need to expand in order to keep up. And it knows that. The Risk Factors portion of the S-1 filing acknowledges the necessity of newness to Snapchat’s business, particularly in a space that’s becoming increasingly crowded with products and services that mimic those central to the Snapchat experience.

"Our ability to engage, retain, and increase our user base and to increase our revenue will depend heavily on our ability to successfully create new products, both independently and together with third parties. We may introduce significant changes to our existing products or develop and introduce new and unproven products, such as Spectacles or other technologies with which we have little or no prior development or operating experience.”

We don’t know exactly where Snapchat’s headed next, but it’s a good bet that it hasn’t been there before. In order to keep up, Snapchat is going to have to forge ahead and do something new — ideally something that can’t be closely replicated or mimicked by another platform with a bigger audience. Make no mistake: This slowed growth isn’t the death knell of Snapchat, but it is a sign that the Snapchat we see six months or a year from now will likely look different because it must. Even if the core product remains completely unchanged, aspects of the Snap ecosystem will be required to evolve in order to survive.

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February 7, 2017 By Mediakix Team

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