Why Snapchat is a mess after 3Q Earnings

Snap reported disappointing financials on Tuesday, not only on the top and bottom lines but also on expected daily active users.

The stock plunged 17 percent in extended trading after the report. To Wall Street, the company looks like a mess, and here are a few reasons why.

Instagram is bigger and easier to use

Instagram has more than 500 million daily users, while Snapchat is sitting at 128 million.

Instagram has an easy-to-use interface that makes it a cinch to snap short videos and post them to friends and family. And your friends and family are probably already on Instagram since it uses the same credentials as Facebook. Like Snapchat, Instagram gives you filters and fun effects, but you don’t have to go swiping around like crazy to find them.

 

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Snap’s quarter was ‘horrible’.

 

Snapchat CEO Evan Spiegel knows this, which explains why he just announced plans for a complete redesign. It better be good, and it better come soon.

Spectacles

Yikes! Spectacles launched last year to much applause in Silicon Valley, but that enthusiasm quickly disappeared. Snap expected its fans to run to vending machines around the country for a shot at buying the camera-equipped sunglasses.

 

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The engagement is higher on Instagram than Snapchat and this makes sense. A lot of Snapchat users watch content without interacting with the content.

 

The marketing worked for a bit until people stopped caring. That’s when Snap decided to sell Spectacles directly from its website. Little did investors know that the company had more than $40 million worth of excess inventory, which Snap wrote off during the quarter.

User growth (or lack thereof)

Finally, Snap can’t seem to attract new users to its platform.

The company had just 178 million daily active users during the quarter, missing estimates of 181.8 million. It only added 4.5 million users in the period. Despite new features like Snap Map and fun new masks for users, the service isn’t giving people many reasons to stick around.

Source

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