Shares in Snap, the parent company of Snapchat, dropped following the release of the company’s third quarter results, despite growing user numbers.
Announced yesterday, Snap reported revenue increases of 50% to $446m in Q3 2019 compared with the previous year, as well as net loss improving by $98m and daily active users increased 13% year-on-year to 210m.
However revenue estimates for the fourth quarter of 2019 of $540m to $560m have fallen short of analysts’ expectations of $555.4m. This saw shares in Snapchat’s parent company Snap Inc. drop by 5% in after-hours trading, but have since bounced back.
Snapchat results: Company defiant amid challenging market
In a statement, Snapchat said that moving forward, it was focusing on continuing to build and develop its augmented reality platform, snap games and Discover platform.
Commenting on Snapchat’s results CEO Evan Spiegel said:
“We delivered strong results this quarter, and we are pleased that the investments we have made are continuing to drive the growth of our community and our business. We are a high growth business, with strong operating leverage, a clear path to profitability, a distinct vision for the future, and the ability to invest over the long term. We are excited about executing on the many opportunities in front of us.”
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The launch of new features similar to Snapchat’s popular filters from the likes of Facebook-owned Instagram saw many users desert the app during 2018, but numbers have picked up again.
Earlier this year, Snap reported that active user numbers had stabilised in its 2018 Q4 results, after losing users for the previous two quarters, boosting the share price and easing fears over the app’s falling popularity.
However, the rise of TikTok, an app by Chinese company ByteDance in which users can make short lipsynced videos, particularly among Snapchat’s young user base, may create future problems for the app.
“Snap needs to make sure it stays focused on offering real value”
However, despite growing user numbers demonstrated in Snapchat’s results, Yuval Ben-Itzhak, CEO of Socialbakers believes that Snapchat will have to focus on offering real value to both users and brands if it is to compete with rivals:
“Snap’s user base may be growing, but it now faces fierce competition not only from Instagram but also from TikTok when it comes to attracting advertisers eager to reach younger audiences. There was a time when Snap was considered indispensable for reaching this younger market. But today, in addition to the ongoing threat from Instagram, many marketers see TikTok as the most relevant platform for reaching teens and young adults.
“Until now, monetisation has been the challenge for TikTok, but the platform has stated that it is exploring opportunities to create value for brands. By the same token, more and more brands are expressing an interest in exploring advertising on TikTok. This means Snap needs to make sure it stays focused on offering real value to both users and advertisers if it is to keep its appeal for brands.
“It will be interesting to see if Snap’s experiments with new formats like Snap Originals and augmented reality ads will be enough to keep TikTok at bay moving into 2020.”