Snapchat Q1 earnings show slowest user growth rate ever

All is not good at Snapchat and Q1 2018 shows why. Snapchat has just had its slowest quarter growth ever.

It reached only 191 million Daily Active Users (DAUs) in the last quarter. That’s up from its 187 million users, but the growth rate is 2.13 percent, its lowest ever. The growth rate in Q4 2017, in comparison, was 5.05 percent. Snapchat made $230.7 million in revenue in Q1 2018 with an adjusted EPS loss of $0.17.

According to Snapchat, revenue was up 54 percent year-over-year, driven by growth in Snap Ads, and down 19 percent sequentially, primarily due to seasonality and redesign.

As regards cash and marketable securities, Snapchat stood at $1.8 billion at March 31, 2018. Capital expenditures increased to $36.3 million in Q1 2018 compared to $18.0 million in Q1 2017 and $21.2 million in Q4 2017.

Snapchat CEO Evan Spiegel said, “Our total revenue for the quarter was $230.7 million, up 54 percent from last year. Our redesign created some headwinds in our revenue this quarter by disrupting user behaviour and creating some apprehension among our advertising partners. We believe that our current path forward will address both issues and that our advertising business has benefitted and will continue to benefit from the tough decisions we make in order to create and maintain a positive and healthy environment for our community over the long term.”

The new app design that Snapchat introduced clearly differentiated friends from professional content creators. According to Evan, this is “important to both our mission and the long-term growth of our business.”

Earlier this year, one tweet by American reality star Kylie Jenner on the redesign made the company lose $1.3 billion in stock market value. The redesign has been a pain point for the company but Evan has refused to back down.

Stiff competition from Facebook and the major redesign that Snap stuck to despite criticism did make its mark. Imran Khan, the Chief Strategy Officer, said,

“While we anticipate that some of these factors may continue to impact our business in Q2, I’m very excited about the second half of this year. This is because of the progress we are making in our three focus areas: number one, enhancing our ad product suite, two, developing efficient tools for our advertisers, and three, proving the effectiveness of our advertising.”

Snapchat has a long challenge before it, and Facebook’s new product announcements and launches at F8 are only going to add to the challenge.