• by Gavin O'Malley  @mp_gavin, February 6, 2018

In some much-needed good news for Snap, the messaging giant said it added more users than expected during the fourth quarter of 2017. From the third quarter of the year to the fourth, Snap’s flagship Snapchat app increased daily active users (DAUs) from 178 million to 187 million.

Year-over-year, DAUs increased 28.8 million -- or 18% -- during the quarter ended December 31.

Although Snap posted a net loss of $350 million, quarterly revenue still reached $285.7 million -- up 72% year-over-year. Snap attributed the gains to auction traction and seasonality.

“Snap’s revenue growth seems to have caught Wall Street by surprise, but it is consistent with overall digital advertising growth (and specifically social advertising). Q4 is historically the strongest quarter for advertising, due to the holidays,” said Forrester analyst Jessica Liu.

Taking what CEO Evan Spiegel called a real “risk,” Snap unveiled Snapchat’s highly anticipated redesign during the fourth quarter.

Along with some subtle stylistic tweaks, the biggest changes include the removal of the app’s Stories page and a clear line between personal communications and media.

Analysts like Liu are still not sold on the redesign.

“It runs counter to why Snapchat was appealing to its younger demographic in the first place. I worry it will alienate that existing user base because they’re now trying to cater to the masses (and Wall Street),” she said.

During fourth-quarter 2017, average revenue per user reached $1.53 -- up 46% year-over-year. Quarterly cost of revenue per user reached $1.02 -- up 5% year-over-year.

Now that much of the early hype has faded, marketers seem less excited about Snapchat’s potential.

“As a platform for brands, it’s a tough value proposition to swallow,” said Ian Baer, chief brand officer at marketing agency Rauxa. “Facebook and Instagram offer a similar but much larger user base, with superior ad products and better analytics."

That said, “there is still something very appealing about the passion of Snapchat users for the platform, where we see it as the channel of choice primarily for Generation Z,” Baer conceded.

Hannu Verkasalo, founder and CEO at Verto Analytics, is optimistic about Snap’s prospects. “An increase in users and time spent per user from September to December 2017 shows that Snapchat still holds a fighting chance against its competitors,” Verkasalo said. 

“With millennials and Gen Zers making up 62% of Snapchat’s adult user base in December 2017, they will be the core group who decides whether the upcoming redesign will be a success for Snap,” Verkasalo added.

Together, millennials and Gen Zers made up 62% of Snapchat users in December 2017 (32.1M users out of 51.7M)

In a rare show of humility for Snapchat, the app recently decided to let users share their Stories on Facebook and Twitter. As such, users will soon have the option of sharing their Stories to linked third-party accounts, even sending Stories via text or email to friends and family without a Snapchat account.

Complicating Snap’s media strategy, CNN recently announced plans to shutter its daily Snapchat show “The Update.”

After less than a year, it became clear to the show wasn’t working. Yet both Snap and CNN have insisted that the imminent demise of “The Update” doesn’t have broader implications for their relationship.