Snapchat had 186 million daily users in Q3, down two million from the previous quarter
This afternoon, messaging app Snapchat reported that it had lost more active users during the three months ended in September than expected by analysts. During the third quarter, the number of daily active users of the app declined to 186 million from 188 million during the second quarter. Despite the decline, the DAU figure was still up from the 178 million recorded during the third quarter of 2017. However, more important to investors was the fact that the 186 million DAUs for Q3 failed to top Wall Street estimates of 187.56 million for the period.
Snap Chief Financial Officer Tim Stone warned analysts during a conference call that the company will lose more users in the current quarter, marking three consecutive quarters with a declining DAU metric for the company. Stone also told Wall Street not to expect a full-year profit in 2019 for Snap, which was a goal the company previously had mentioned in an internal memo.
Some of the numbers reported today topped forecasts. For example, revenue rose above the expected $283.2 million to hit a record $297.7 million, a 43% jump from last year's top line. Average revenue per user rose to $1.60 from $1.17, led by growth outside North America. The net loss declined to $325.1 million (25 cents per share), from $443.2 million (36 cents per share) a year earlier. Parent company Snap says that revenue for the current quarter ending at the end of the year will range from $355 million to $380 million. Analysts were looking for $371 million.
CEO Evan Spiegel reiterated that Snapchat will now go after older users in the U.S. and Europe. Jessica Liu, an analyst at Forrester, says that one of Snap's biggest problems with the Snapchat app is that the company "has an unclear vision on how to break out beyond the under-30 demographic in a very crowded social media landscape." One of Snapchat's biggest rivals, Instagram, has been red hot. Part of this is due to the "Stories" feature that started on Snapchat and was implemented better on Instagram. Snapchat is still well known for its Lenses feature that allows a user to snap a selfie and then adorn his/her photo with cartoonish images like big floppy dog ears, a police hat with dark sunglasses, and much more.
To keep users returning to Snapchat, the company announced a couple of weeks ago that it will start showing fast-paced scripted shows on the app. The serialized programming will be supported by ads.
Investors reacted poorly to the report. After hours, the stock closed at $6.28 for a loss of 71 cents or 10.16%.