Why Snapchat's Popularity Plateaued

Snap rejected a takeover bid from Facebook. So Facebook just reverse engineered all of Snapchat's features and installed them in its own offerings. Bill Gates, Steve Jobs and other tech pioneers would recognize the tactic - and probably chuckle.

Those who recall Yahoo's and Twitter's early insistence on going it alone will understandably shiver. JL

Will Oremus reports in Slate:

Snapchat was supposed to be the hip teen that made Facebook look old and out-of-touch. Instead, Facebook is pushing it around like the class bully and stealing its lunch money. Mark Zuckerberg’s company, whose acquisition bid Spiegel once famously spurned, has copied Snapchat’s key features—not just once, but on nearly every platform it owns—and the competition appears to be taking its toll.
This was not the plan. On Snap Inc.’s second earnings call as a public company, CEO Evan Spiegel started with the good news. Users visited Snapchat more frequently in the latest quarter, and spent more time on it “than ever before,” Spiegel said Thursday.

It’s the sort of generic superlative that tech executives reach for when they need to put a positive gloss on a discouraging trend. Snapchat did add 7.3 million daily active users in the past three months, which sounds like a lot—until you realize it added 8 million in the three months before that. Investors were hoping for a number closer to 9 million or 10 million, which would have suggested that growth was rebounding rather than slowing.

For a company in Snap’s position, rapid growth is expected. What people really care about is: Are you growing faster than before? Or are you heading for—gasp—a plateau? In Snapchat’s case, it’s beginning to look like the latter. That’s why the company’s stock had tumbled a precipitous 17 percent in after-hours trading.

That disappointing user growth was actually worse news than the ugly-sounding $443 million net loss Snapchat posted. Those investing in it were hoping for a rocket ride to global ubiquity, similar to the ones Facebook and Google enjoyed in the years following their IPOs. They would have been happy to tolerate plenty of big losses along the way, as long as the future looked bright. (Just ask Amazon.) Instead, they’re hearing whispers of dirty words like “Twitter,” whose growth began to flatline almost as soon as it went public.

Snapchat was supposed to be the hip teen that made Facebook look old and out-of-touch. Instead, Facebook is pushing it around like the class bully and stealing its lunch money. Mark Zuckerberg’s company, whose acquisition bid Spiegel once famously spurned, has copied Snapchat’s key features—not just once, but on nearly every platform it owns—and the competition appears to be taking its toll.

Spiegel sounded embattled and a little irritable on the earnings call, which at one point featured a hot mic snafu in which an analyst could be

heard mocking Spiegel for failing to answer his question. That question came after Snap executives excused the company’s lackluster growth by saying that Snapchat doesn’t rely on “growth-hacking” tricks like some of its competitors do. What specific growth-hacking tricks, the analyst asked, does Snapchat not engage in? “I think there are plenty of examples online if you want to go for a Google,” Spiegel replied.

As poorly as things are going for Snapchat, there are still a few factors working in its favor. Growing by 7 million active users may be a disappointment given its previous trajectory, but the 4 million that it added in North America suggests that there is room for more even in its home market. It would be worse if Americans were fleeing and all of the growth was coming from low-hanging fruit overseas.

More importantly, those who do use Snapchat still seem to use it a lot. Daily users under 25 spend an average of 40 minutes per day on the app, Spiegel said, while those over 25 average 20 minutes. Such deep engagement has been a key to Facebook’s long-term success. Then again, Twitter has loyal users too—it’s attracting the casual ones that has given it fits.

It’s too soon to write off Snapchat, which is still by most standards a young and fast-growing company. But when your competitive edge is being the trendy upstart, it’s never good to see the trends turning in the wrong direction.