To say Snapchat has been on a rollercoaster ride since their IPO in March of 2017 would be a drastic understatement. Between a slow start in revenue generated, Spectacles not delivering on expectations, and the shameless cloning of its product with Instagram Stories, things have certainly been turbulent.
This week surely added fuel to that fire. Snapchat recently released its Q2 earnings report, which noted a loss of approximately three million daily active users over the course of that quarter.
Much hay has been made of this figure--but its importance has been blown out of proportion for a handful of reasons:
Snap's value goes beyond its number of users.
To directly compare the successes of Instagram Stories and Facebook with Snapchat is erroneous because they're built on two entirely different models. Snap is built on the concept of intimacy and privacy between friends. Instagram and Facebook center around maximizing number of users to bolster advertising revenue.
Every time a Grandmother Jill or Auntie Norma creates an Instagram account, Snap's inherent value grows stronger. Younger users will grow increasingly reluctant to post their most authentic moments--a night out with friends or a concert, for example--to Instagram and Facebook, platforms built on the concept of oversharing.
We often talk like Instagram Stories and Snapchat are mutually exclusive in terms of success. I see them more like the Oscars and the Sundance Film Festival, which have no problem simultaneously thriving.
The company had a decent quarter by other metrics.
Snapchat had a solid quarter on a number of other important metrics. It exceeded expectations on revenue generated by close to $13 million, and its revenue per user in countries outside the United States and Canada grew by 65 percent. Its number of monthly active users in the United States and Canada increased, too.
Since Snap's IPO in 2017, the biggest area of concern for its investors has been revenue, not whether its core users will continue to use the app. Figuring out how Snap is going to monetize its user base to maximize returns for shareholders has been at the forefront of the company's to-do list. By tapping into new global markets and proving the platform can be a viable advertising outlet for buyers, I think Snap is probably taking a step in the right direction.
The redesign was a big mistake that contributed to the loss.
In early 2018, Snap overhauled its app's already-cryptic user interface, which left most users scratching their heads. It's very likely this played a big part in the dramatic drop in users throughout Q2. Even Evan Spiegel, founder and CEO of Snapchat, admitted the redesign was a contributing factor to the loss.
To me, this indicates that similar overhauls are unlikely to happen again. And by addressing the qualms of the redesign--which started happening in a May app update--Snap could see some of these estranged users return to the app.
Snap isn't in the clear yet.
Snap's value will only remain intact if its leaders stand firm and don't get bullied in the boardroom by shortsighted investors. The second Snap veers from its unique identity (a private app for friends rather than vague high school acquaintances) and jumps into the "Facebook rat race" of gathering as many new users as humanly possible, the game will already be lost.
The company simply doesn't have the resources to go head-to-head with the behemoth Mark Zuckerberg has built up in Mountain View. By remaining unique, Snapchat can retain its position as the wildcard--even the "cool uncle"--of the social media landscape.
This should matter to you as an entrepreneur.
Don't let this quarterly report deter you from experimenting with the platform. Snapchat can--and should--still play a critical role in your marketing and advertising strategy.
If your business targets Millennials or anyone younger, using the app to advertise could prove very fruitful. If you own a dentist office in Beverly Hills, chances are the platform won't be a worthwhile investment. But if you own a trendy streetwear line, your money could be well spent on Snapchat. Snap's advertising revenue is higher than it has ever been, meaning many other companies are hopping onboard, too.
Other platforms rely on sheer volume of users. Snapchat grows stronger when it focuses on the inherent value its holds for its consumers.
If it can stick to its guns, it'll be just fine. If it reacts to the Q2 bump in the road by straying away from its identity, it'll lose quickly.