Investors, analysts, and sideline gawkers have been anxiously waiting to examine Snap Inc.’s user growth heading into the company’s first earnings report, due after the closing bell on Wednesday. And after an 82 percent drop in user growth following the release of Instagram Stories last year, it’s a credible worry for those looking to invest in the company.
But even with an uninspiring user growth trajectory, it would take teenage-centric followers dropping Snapchat en masse in favor of Instagram Stories (and it’s not), to slow down the rocket ship.
Snap CEO Evan Spiegel and Co. are better positioned to give investors a return on their money than are their counterparts at Twitter — another social media giant that has been plagued by dwindling user growth.
To be fair to Twitter, any platform boasting nearly 330 million monthly active users — like Twitter has — is a tech beast. The Blue Bird has even started to turn around its lagging growth, recently reporting a 14 percent spike in Daily Active Users and a 6 percent jump in Monthly Active Users.
Snap shareholders actually hope to see their investment follow Facebook’s chart, rather than Twitter’s. Lucky for them, Snap has already started to address how to harness its existing user base, while at the same time courting new customers — and much better than Jack Dorsey’s crew at Twitter.
For starters, Twitter is having a difficult time attracting ad money. Meanwhile, advertisers are flocking to Snap for its sweet, sweet young (and sticky) demo. This will only continue to generate revenue, with Snap rolling out its self-serve ad manager next month.
The company is also aggressively looking to augment the Snapchat experience with original content. This is in addition to its publisher options in Discovery, as well as its push towards more AR features. Sure, Twitter has Thursday Night NFL rights at a discount price, but it was late to the content game. Had it looked to combat growth concerns earlier in its post-IPO days with exclusive shows, maybe share prices wouldn’t have cratered from its $45 opening. (After hitting an all-time high of $69 in early 2014, Twitter shares now trades in the high-teens). Snapchat’s dating show idea may be trite, but at least it’s being proactive in looking for more ways to keep eyeballs on the app. And with more original content coming in the near future, Snap is ready to grab more ad dollars.
Also, new products: It’s hard to rag on Twitter for not having a cool hardware product. On the other hand, Snap’s Spectacles looks poised to be a great first dive into the product game for the newly-public company. We’ll find out more about sales in their report, but when you have people lining up for hours in the cold to grab a pair, you’re probably onto something. And this is where Spiegel’s vision of Snap as a “camera company” really pays off — it opens up another revenue stream, and also creates a gravitational pull back towards Snapchat for new and existing users. This’ll only become more important as Instagram continues to rip Snapchat’s features.
Despite the parallels when it comes to user growth worries between Snap and Twitter, the comparison should end there. Eventually, investors will be better off accepting it won’t see Facebook-like growth from Snap. It’s not Facebook. But the company doesn’t need to be, if it can outline an effective plan to leverage current users and drive revenue forward. And with what we’ve seen so far, you’d be hard-pressed to find a reason for a Snap’s shares to follow in Twitter’s footsteps.