Smoke And Mirrors: How Snap And Pinterest Hide User Attrition

On April 4th, Snap announced a programmatic offering called Audience Network, which copies Facebook’s (FB) strategy of selling user data for third-party ads across multiple applications (Snap even copied the name – that should be interesting for trademark attorneys). Snap’s Audience Network could revive revenue in future quarters, however, the user base will continue to be a problem as there is a competitor from China, TikTok, that is taking market share of the Millennial audience. For specific months last year, such as September 2018, TikTok beat Facebook, Instagram and YouTube as the number one downloaded app.

Keep in mind, Snap’s user base is more transparent for analysis purposes than Pinterest, as the latter hides their stagnant domestic growth with 25-cent global growth. Overall, attrition in the regions driving revenue typically doesn’t make for a good investment in mobile or internet companies where audience is everything.

Regarding Snap’s earnings today, I’d keep a close eye on the declining to flat user base – regardless if they beat or miss on revenue. In the future, Snap’s Audience Network may help revenue quite a bit, but it will be short lived as California passed the California Consumer Privacy Act that go into effect in 2020 – more on this later.

Update: On April 23rd, 2019, Snap reported 190 million DAU which is a 1 million user decline from year-ago quarter of 191 million DAU. 

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Kurt Benson 2 years ago Member's comment

Nicely done. This is a problem that should get more attention. $PINS $SNAP