The Stories War has officially killed Snapchat’s growth. In Q2 2018 earnings today, Snapchat’s user count shrank 1.5 pecent percent to 188 million this quarter, down from 191 million and positive 2.9 percent user growth last quarter.
However, Snapchat beat expectations with $262.3 million in revenue and a loss of $0.14 while Wall Street estimated an EPS loss of $0.17 with $249.8 million in revenue. Snap’s net loss dereased by 20 percent year-over-year, so it only destroyed $353 million this quarter compared to $385 million last quarter.
Despite its shrinking user count, the improvement to revenue (up 44 percent year-over-year) and reduced losses led Wall Street to boost Snap’s share price 11 percent in after-hours trading to around $14.60 after it closed at $13.12
Snapchat is coming off of a disatrous Q1 earnings with its slowest ever user growth rate that led to a 24 percent plunge in its share price in May. But the company has been highly volatile, seeing a 37 percent boost in its share price after surprisingly positive Q4 2017 earnings. Now it’s proving that Facebook isn’t the only social network with growth troubles.
The quarter saw Snapchat escape much of the scrutiny facing other social networks regarding fake news and election interference. Snapchat started running unskippable ads in its Shows that could be a big money maker if extended to Stories. It began experimenting with ecommerce in earnest, allowing brands to sell things people can buy without leaving the app. It also opened self-serve buying of its augmented reality lens ads that people not only post, but play with for extended periods of time. And it launched its privacy-safe Snap Kit developer platform in hopes that alliances and referral traffic would help revive its user growth.
But problematically, its competitors like Instagram Stories continued to surge, with it now having 400 million daily Stories users and WhatsApp Status now having 450 million. Combined, Facebook has over 1.1 billion daily (duplicated) Stories users across its family of apps. That reach could make it tough for Snap to compete for ad dollars. And with its user count actually decreasing, that could make for a grim future for the teen sensation.