Snapchat’s Share Price Drops Due to Slow User Growth

Snapchat [NYSE:SNAP] has had the slowest user growth it’s ever experienced as its shares drop by 3.01%.

They went through a new redesign which many users did not favour.

Snapchat struggled to attract new users to its platform, which resulted in the app having a hard time keeping up with its figures from last quarter.

At the beginning of the month its shares plummeted by 15%, staggering the company.

The aftermath is yet to show some relief.

Growth struggles caught Snapchat off guard

Investors are disheartened by Snapchat’s shrinking user base.

Competitors such as Instagram and WhatsApp have both implemented features which mimic Snapchat’s functionalities.

Both platforms allow the user to post stories and videos of their day on the user feed.

Instagram stories have over 300 million daily users while WhatsApp has 450 million posting their status.

CEO Evan Spiegel stated that its March user growth has been lower than every other month this year.

Snapchat will have to increase its user growth to properly compete with its competitors.

Josh Constantine from TechCrunch reported that Snapchat:

Saw an unprecedented decline in its average revenue per user in North America. It’s standard for the holiday Q4 to rake in more cash than the following Q1. But Snap’s ARPU in the US and Canada slipped to $2.10, down from $2.75 in Q4, but also down from $2.17 in Q3. That indicates serious problems monetizing that could be due to fewer Stories or Discover ad views during Q1.

Redesigns disrupted user behaviour, creating problems with its advertising partners.

Its redesign has been criticised as inferior to what it had prior — even its CEO Evan Spiegel recognised its faults.

Snapchat came out saying that they are aiming to increase its growth rate for Q2.


Ryan Clarkson-Ledward,
For Money Morning

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