Snapchat's Growth Dips As Competitive Pressures Mount

Supporting analysts’ worst fears, new research suggests Snapchat’s growth is already sagging.

Annually, the rate at which people are downloading the app has dropped by 22% over the first two months of the second quarter, according to analytics firm Sensor Tower.

Worse yet, downloads in Apple’s App Store were down by 40% in April and May, year-over-year.

“These growth figures were global across [Apple’s] App Store and Google Play, so they don’t reflect growth in any specific country or region,” said Randy Nelson, head of mobile insights at Sensor Tower.

Citing the findings in an investor note, Nomura Instinet analyst Anthony DiClemente says Snap is succumbing to fierce competition from rivals -- and Instagram especially.

“Competitive pressures may be intensifying for Snap, challenging the platform’s ability to attract and retain new users,” DiClemente reasons. The new research come a month after Snap’s not-so-stellar debut earnings report. Snap partially blamed “seasonality” for revenue softness, which didn’t sit well with many analysts.

As a public company, Snap has plenty of resources to drive adoption, but existing efforts remain in their infancy, according to DiClemente.

“Seasonality is commonly associated with more mature companies,” Pivotal’s Brian Wieser wrote in a research note. Pivotal reduced its full-year revenue expectations for Snap to $872 million -- down from $963 million.

DiClemente found Snap’s seasonality excuse to be similarly troubling. “We are surprised that a newly public company, supposedly early in its growth cycle, would see near-term results impacted by broader seasonal ad market trends,” DiClemente noted.

For the second quarter, DiClemente said Nomura Instinet was decreasing Snap’s revenue forecast from $204 million to $173 million.

Not everyone is surprised by Snap’s growing problem.

“This news isn’t surprising, based on several months of data which shows Snapchat losing ground to Instagram in terms of new users, particularly in developing app economies such as India, Indonesia, Turkey, and Brazil, where it hasn't been able to match the considerable growth of Facebook's app,” said Oliver Yeh, co-founder of Sensor Tower.

Added Yeh: “In the face of intense competition from Instagram, with its sizable lead in daily active users and continuing adoption of Snapchat's most popular features, we see a need for Snapchat to out-innovate Facebook and present a compelling reason for users in developing markets to choose it over Instagram.”

1 comment about "Snapchat's Growth Dips As Competitive Pressures Mount".
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  1. PJ Lehrer from NYU, June 10, 2017 at 8:40 a.m.

    If you were surprised you must not have been paying attention.  More here...

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