Snapchat finally pulls out of its tailspin with a surprise surge in daily users

Laurence Dodds
A sculpture of one of Snapchat's augmented reality characters at a conference in West Hollywood, California - AFP

Snapchat has increased its number of daily active users for the first time in twelve months, surpassing analysts' expectations for the speed of its recovery.

The troubled photo-sharing app said on Tuesday that its user base had shot up from 186m to 190m since the beginning of 2019, driven by strong growth outside the US and Europe and a belated redesign of its unpopular Android version.

That was still below its peak last year of 191m but higher than Wall Street had predicted, causing shares in Snapchat's parent company, Snap, to jump 12pc in aftermarket trading before dropping again to their closing price.

It was among a slew of better-than-expected financial results which pushed the tech-heavy Nasdaq index and the S&P 500 to new closing highs, ending a bearish drought that had persisted since September.

Evan Spiegel, Snap's 28-year-old chief executive, said the company was on course for "long-term growth", adding that the new Android app took up 25pc less storage space and opens 20pc faster than its predecessor. 

He said the company had "worked hard to thoughtfully balance" its long-term investments in augmented reality, gaming and advertising systems with "discipline" in spending, and that it had cut costs sharply enough to compensate for its projects.

Snap's revenue grew by 39pc year on year, from $231m (£179m) to $320m, beating Wall Street's expectations, while its net losses dropped from $385m to $310m. Its average revenue per user rose by 39pc to $1.68.

But the company still has a long climb ahead if it hopes to become profitable and fend of stiff competition from Facebook, whose copycat Instagram Stories app long ago surpassed Snapchat's daily users. 

It remains well behind the expectations it set when it went public in 2017, after which its share price declined by more than 60pc as its revenue growth stalled.

Part of that drag was caused by a botched update to Snapchat's iPhone version, which led many users, including the reality TV star Kylie Jenner, to desert the platform. A delayed update to its Android version, meanwhile, limited Snapchat's growth outside the US and Europe, where the vast majority of people use cheaper Android phones.

That problem, at least, appeared to be over. Mr Spiegel described its new Android app as "the price of admission to international markets" and said it had led to a 6pc increase in users in its first week alone.

Half of the company's growth this year came from the USA and Europe, where Mr Spiegel has said he wants to focus his efforts. In those regions average revenue per user rose by 67pc year on year to $0.97.

Yet Mr Spiegel appeared to have dropped a parallel strategy to widen Snapchat's audience beyond its devoted core following of 13 to 24-year-olds. When asked by one analyst to give an update, he demurred and said that was "a long-term strategy".

The company claims to reach 90pc of 13 to 24-year-olds in the USA and 75pc of 13 to 34-year-olds in the USA.

Seperately, Twitter added around 8m new users, following six months of decline caused in part by its crackdown on abusive and fake accounts. its chief executive Jack Dorsey said it was “taking a more proactive approach” to abuse, looking to "reduce the burden on victims". 

US president Donald Trump responded to Twitter's good results by accusing it of "discriminating" against conservatives and "playing political games". Mr Dorsey later met with Mr Trump behind closed doors, describing the meeting as "constructive". 

Debra Aho Williamson, principle analyst at eMarketer, said: "Snapchat’s user gains and revenue growth are a positive sign. Gaining users has been a struggle for Snapchat in the wake of 2017’s failed redesign and the slow progress on the Android update.

"The revamped Android app could drive more gains in subsequent quarters if a significant number of people start using this version of Snapchat. A sizeable chunk of the world’s smartphone user base is on Android."