It’s been 9 months since Snap’s IPO, and according to its most recent earnings reports, the company is facing some major growth challenges. In the face of poor revenue and declining growth, Snap seems to finally admit that it needs to overcome major experience hurdles and that better address the looming presence of Facebook.
Though Snap’s struggles aren’t new, its earnings report is certainly a clear warning for the platform to tighten up. To better understand Snap’s position in the industry, we’ve compiled the most relevant statistics from its Q3 earnings report and recent studies.
After its third-quarter earnings report November 7, 2017, Snap’s stock price plummeted 20% from $15.30 to under $12.80 the following morning with poor investor confidence. Snap’s report summarizes an abysmal quarter and forecasts challenging coming months. Missing on revenue and drowning in loss, Snap’s price target was downgraded by research firms to $7, a far way from its height at $29 a share.
Snap’s ad rates, more specifically for cost per ad impression, have dropped 60% in the past year. Snap attributes this missed revenue to a shift from direct sales to an auction-based bidding system to advertisers.
Snap acknowledges its inability to keep with the highly competitive and rapidly changing market for advertising companies. In comparison, Facebook ad rates are rising nearly 35%.
Related Post: Snapchat Stories Use Is Down 33% In 6 Months
The social media company reported nearly $450 million in losses, tripling over a year. Snap earned $208 million in revenue and saw a loss of $0.14 per share. Snap’s cash flow was negative $220 million.
Moreover, despite the cash infusions from its spectacular IPO earlier in the year, Snap has blown through nearly 30% of its cash from the past six months at $2.3 billion.
In addition to its financial woes, Snap is facing major challenges in growing its user base experiencing its lowest growth rate to date and falling out of the iOS top ten for the first time this year.
Snap reported that daily active users (DAUs) grew 25.2 million to 178 million in Q3 2017, increasing of 17% year-over-year. Quarter growth shows that DAUs increased 4.5 million or 2.9% quarter-over-quarter, from 173 million in Q2 2017. Snapchat usage among international users is also increasing slowly, up to 44 million from 42 million the previous quarter.
The amount of revenue that social media generates on a platform is standard across the industry. Snap’s average revenue per user was $1.17 in its third quarter of 2017, increasing 39% in a year from $0.84.
Though value per user has increased, Snap’s average lags behind that of other platforms. In particular, Facebook is generating more than 6 times per user than Snap.
Underwhelming Spectacles sales are compounding to the Snap train wreck, as the social media platform and self-proclaimed “camera company” is left with $39.9 million in charges for excess inventory.
A month before its earnings call, Snap announced that they had sold only a little over 150 million pairs. At $129 a pair, the camera-equipped sunglasses are a poor alternative to other photo and video taking options, and are likely too expensive for their target millennial and Gen Z audience.
After Snap’s horrific losses after its quarter 3 reports, China-based social media conglomerate Tencent purchased 148.5 million shares, or a 10% stake in the company.
Tencent’s confidence in Snap’s ability to grow despite low revenue, shows that there is still a bit of promise in Snap. Tencent operates two of the biggest social media networks in China, WeChat and QQ, each totalling over a billion users. How Tencent will bolster Snap’s audience remains to be seen.
In a recent study, Mediakix tracked Stories usage of top Snapchat influencers between Instagram and Snapchat discovering that even its power users are abandoning Snapchat and opting to post 2x more on Instagram Stories.
Historically, Snap has given the cold shoulder to its influencers (much like Twitter’s failed Vine) with many influencers speaking out against the camera company. In its prepared quarterly remarks, Snap may begin to pay influencers and top creators to use Snapchat.
“[W]e have historically neglected the creator community on Snapchat that creates and distributes public Stories for the broader Snapchat audience. In 2018, we are going to build more distribution and monetization opportunities for these creators in an effort to empower our creative community to express themselves to a larger audience and build a business with their creativity.”