Snapchat was flying high in early 2016, but the launch of direct competitor Instagram Stories coincided with a massive drop in how fast Snapchat was growing, judging by new stats in its. That aligns with our report that multiple analytic providers and social media talent managers saw .
While we can’t be sure Instagram Stories directly caused the issue, its rapid rise is highly correlated with Snapchat’s slow down. The rise of international Snapchat Stories competitor Snow also could have contributed. Meanwhile, Snap says technical errors in the roll out of new products may have inhibited user growth at the end of Q3.
In Q1 2016, Snapchat averaged 122 million daily active users, having grown 14 percent over the past quarter. Then Q2 proved to be its best growth quarter ever, thanks to massive interest in full-screen visual communication and a lack of direct competitors. Snapchat hit 143 million daily users with a whopping 17.2 percent growth rate.
But on August 2nd, Snapchat’s much larger competitor Instagram launched an exact clone of Snapchat Stories at the top of its app used by 300 million people daily and 500 million people each month. By October, the feature had 100 million daily users of its own.
Suddenly, Snapchat slowed down. It had its lowest percentage growth quarter since the beginning of its publicly available data in 2014. Snapchat grew just 7 percent in Q3 2016 to reach 153 million daily users. And in Q4 it sank further, as Instagram Stories reached 150 million daily users, just shy of Snapchat’s total number. Snapchat only pulled in an average daily user count of 158 million with a 3.2 percent growth rate in Q4.
That means Snapchat was growing at just one-fifth of the speed it was two quarters earlier. Its growth rate actually slowed beneath that of Facebook, which grew daily users. By December, Snapchat had 161 million users, but that’s not enough to buck this trend. If you calculated the growth between the Q3 average and December 2016, it would still only be 5.2 percent.
Lack of progress in the international “rest of world” market that includes developing countries and Asia seems to have contributed to the slow down. Snapchat reported 39 million daily users in this region in Q3, then the same number in Q4. That could be because Instagram has 80 percent of its users outside of the U.S., and its Stories product quickly gained steam in these markets. South Korean app Snow also was on the rise in late 2016 and could have inhibited Snapchat’s growth.
Snapchat admitted in its IPO filing’s risk factors that “We face significant competition in almost every aspect of our business both domestically and internationally,” listing many companies including Facebook and Instagram. Then it noted, “For example, Instagram, a subsidiary of Facebook, recently introduced a “stories” feature that largely mimics our Stories feature and may be directly competitive.”
It even highlights that growth slowed at the end of Q3, right after Instagram Stories launched. It writes:
Although Daily Active Users grew by 7%…for the quarter ended September 30, 2016, the growth in Daily Active Users was relatively flat in the latter part of the quarter ended September 30, 2016. There are many factors that could negatively affect user retention, growth, and engagement, including if:
users increasingly engage with competing products instead of ours
our competitors may mimic our products and therefore harm our user engagement and growth
[Update: Snap also lists technical issues as hindering growth at the end of Q3 2016, which may have been related to the rollout of Memories, a bandwidth-intensive feature that saves users’ content in the app. It wrote:
“In mid-2016, we launched several products and released multiple updates, which resulted in a number of technical issues that diminished the performance of our application. We believe these performance issues resulted in a reduction in growth of Daily Active Users in the latter part of the quarter ended September 30, 2016.”]
This decline in user growth rate may force Snapchat to define itself not by scale, but by the deep engagement it shows. The most impressive stats in today’s IPO filing centered around just how often each of its users open the app. The average daily user opens Snapchat 18 times a day and uses it for 25 to 30 minutes, with 60 percent of them creating Snaps and/or using its chat feature daily.
That engagement, combined with vivid full-screen ads, may be enough for it to build a healthy business. But you can expect the growth rate to become a fixation for Wall Street.
Link : https://techcrunch.com/2017/02/02/slowchat/?ncid=rss