Snapchat Earning’s Performance Is Plummeting: Q1 2018 Results
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Making Sense of Snapchat’s Earnings Call
On May 1, 2018, Snap Inc. announced its Q1 2018 results. In a violent turn from its impressive Q4 2017 performance, the Snapchat parent company recorded one of its worst quarters in company history. User growth has stalled and revenue has dipped, leaving many wondering: Is Snapchat on its way to the grave?
Immediately following the announcement, Snap Inc. share prices plummeted by roughly 15%. Amidst rumors that Snapchat is dying, the disappointing quarter creates additional challenges for the app to overcome.
Here we’ll delve into Snap Inc.’s disappointing Q1 2018 results, offer insight into what factors may have contributed to its rocky start to the year, and speculate its implications for the wider influencer industry.
Snapchat’s Q1 2018 Results: Key Takeaways
Snap Inc. held its Q1 2018 earnings call on May 1, 2018. In the hours following the earnings call Snap Inc.’s share price dropped a reported 15% to 20% to $12.00, a drastic change compared to the 27% its stock jumped in the hours following its Q4 2017 earnings call. Explore key findings from the latest earnings report below:
1. Snapchat’s quarterly user growth rate slowed to 2.13%, its lowest ever.
As of Q1 2018, 191 million people use Snapchat every day, up from 187 million in Q4 2017. Though Snapchat’s user base grew by 4 million during Q1 2018, its quarterly user growth rate of 2.13% was its lowest ever and particularly dismal compared to its 5.05% growth rate during Q4 2017.
The app is struggling considerably against competitors. Its nearly 200 million users dwarf Instagram Stories’ 300 million DAUs and WhatsApp’s 450 million DAUs.
2. Revenue dropped 19% quarter-over-quarter for Snap Inc.
During Q1 2018, Snap Inc. generated $230.7 million in revenue, up 54% year-over-year. However, the company’s revenue dropped 19% quarter-over-quarter, a dip Snap Inc. accredits “...primarily due to seasonality and our redesign.”
3. Average revenue per user (ARPU) was $1.21 in Q1 2018, down 21% quarter-over-quarter.
During Q1 2018, the average Snapchat user generated $1.21 in revenue. Although ARPU increased 34% year-over-year, it dropped 21% compared to Q4 2017.
4. Snapchat discloses new Snap Pro for Businesses and Creators feature.
In addition to sharing its earnings, Snap Inc. CEO Evan Spiegel disclosed an upcoming Snapchat feature that may be exactly what Snapchat needs. Snap Pro For Businesses and Creators will enable businesses and marketers to communicate with Snapchat users. Snap Pro’s main selling points are ease of use and ROI, but given that the project is still in the early phases, only time can tell.
What Factors Contributed To Snap's Disappointing Q1 2018 Results?
1. Snapchat’s Redesign
In the first quarter of the year, Snap Inc. rolled out Snapchat’s redesign — a decision that was met with criticism from users. Snapchat CEO and co-founder Evan Spiegel described the app’s new design as, “...driven by our fundamental belief that separating friends from professional content creators is important to both our mission and the long-term growth of our business.” Retrospectively, Spiegel credits the disappointing Q1 results to the redesign in saying, “A change this big to existing behavior comes with some disruption.”
Social media users every where have expressed dissatisfaction with Snapchat’s redesign. In fact, a change.org petition for Snapchat to revert the update to the prior version garnered more than 1.2 million signatures.
Snapchat executives like Spiegel may be correct that the update and redesign is the cause of Snapchat’s weak first quarter. App updates are often met with criticism or reluctance, but not all apps experience such negative consequences. In March 2016, Instagram replaced their chronological timeline with a timeline sorted by an algorithm. After two years of criticism — and hundreds of thousands of petition signatures — Instagram announced that it would begin making changes to sort posts more chronologically again.
2. Influencer Dissatisfaction With Snapchat
Influencers have been known to use Snapchat to connect with their large audiences and partner with brands to promote products and services of all types. An influencer’s use of a social platform and his/her audiences subsequent use of that platform can largely impact its success. Depending on the size of an influencer, his/her endorsement of a platform can be incredibly helpful, and his/her criticisms particularly harmful.
In February after Snapchat’s major redesign, celebrity influencer Kylie Jenner tweeted her negative sentiments toward the update. On Twitter alone, she maintains over 25.5 million followers. After Jenner’s tweet, share prices rapidly dropped 6% — lowering Snapchat’s market value an estimated $1.3 billion.
It’s likely that the criticisms Jenner’s tweet sparked around the Snapchat update affected not only Snapchat investors, but also marketers and other influencers who have been using Snapchat as a platform to communicate brand messaging. For example, model and influencer Chrissy Teigen announced that she stopped using Snapchat in March. Because macro influencers play a large role in creating audiences on social media, marketers can benefit from paying attention to which platforms influencers use most.
Related Post: As Top Snapchat Influencers Leave, Is Snapchat Dead?
3. Serious Competition
Snapchat’s main competitors Facebook Stories, Instagram Stories and WhatsApp Statuses, may be virtual destinations for Snapchat’s fleeing users. A Mediakix study found that social influencers have largely shifted toward using Instagram over Snapchat. Over a six month period, influencers used Snapchat 33% less and Instagram twice as much.
Globally, Snapchat faces even tougher competition with these channels, whose user bases span the world. According to May 2018 report, Snapchat largely “neglected the international market in its early years.” Other platforms, particularly WhatsApp, have been able to reach users around the world. With over one billion monthly users, WhatsApp connects more users than Snapchat and has added more photo and video sharing features to replicate Snapchat’s functions.
Ultimately, Snapchat will continue to have to fight for space in the social media industry with competitors adding similar (and perhaps more user-friendly) features and interfaces, as well as finding new and better ways to monetize its estimated 191 million monthly active users.
Related Post: How Many People Use Instagram Stories [Growth Chart]
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May 16, 2018 By Mediakix Team