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Snap's drop in users signals social media peak

Snapchat's decline follows similar trends reported by Facebook and Twitter

Kate Conger | NYT 

Snapchat, which began as a disappearing messaging app and has emphasised curation of content, has largely sidestepped some of the issues that Facebook and Twitter are facing

For years, people seemed to have an unlimited appetite for signing up for services. Now some of those companies may be hitting a wall to adding new users.

On Tuesday, Snap, the maker of the app, said it lost three million daily active users in the second quarter from earlier this year. It was the first time since the company went public in early 2017 that it had reported a decline in users.

Snap’s report follows similar trends from and revealed late last month that its number of users in the United States was flat from earlier this year and that its users in Europe had fallen over the same period, even though its total number of members had grown. And Twitter, which has struggled for years to increase interest in its platform, also said in late July that its monthly active users had decreased by one million from earlier this year. After those disclosures, share prices of both and tumbled.

The declines and flattening growth raise questions about whether the companies have reached a saturation point in some markets, especially in developed countries. That may have been compounded by a steady stream of bad news about in recent months, which may have also deterred users. Facebook and have grappled with the spread of misinformation and foreign interference on their sites.

Just this week, Facebook and Twitter were in the spotlight again for how they were handling misinformation spread by Alex Jones, the internet’s notorious conspiracy theorist. On Monday, Facebook removed four pages belonging to Jones for violating its policies by “glorifying violence,” among other things. Twitter said Jones’ accounts and that of his right-wing site, Infowars, did not violate its rules.

“There are limits to growth; the market cannot grow forever,” said Brian Wieser, an analyst at Pivotal Research. “The faster they’ve been growing in recent years, the sooner they were getting there.”

Snap, which began as a disappearing messaging app and has emphasised curation of content, has largely sidestepped some of the issues that Facebook and Twitter are facing. On Tuesday, the company also posted a 49 per cent jump in revenue to $262 million and a narrower net loss of $353 million for its second quarter from a year earlier.

But Tim Stone, Snap’s chief financial officer, cautioned that user numbers could continue to fall. He said Snap has historically experienced a dip in daily active users during the third quarter. He added that Snap’s 100 million monthly active users in the United States and Canada — the first time the company has unveiled numbers for monthly active users — was “a noteworthy achievement for a company that is less than seven years old.”

Snap has been dealing with a user backlash for months over a botched redesign of Late last year, the company changed the app to separate chats and stories from friends from the content of media properties, such as celebrities and publications.

The shift angered many users, including celebrities. So in May, Snap announced that it was reversing some of the changes and mixing people’s stories with media content.

In a conference call on Tuesday, Snap’s chief executive, Evan Spiegel, blamed the redesign for the drop in daily active users.

He also said that retention of new users over the age of 35 — which is well outside Snap’s core demographic of teenagers and younger users — had improved. He and Snap’s chief strategy officer, Imran Khan, emphasised the relatively young age of users and the amount of time they spend on the app may appeal to advertisers.

Wieser said he agreed that the appeal to advertisers was more important than whether Snap continues to grab new users. “Consumers are the product. Advertisers are the customer”, he said.

Still, Wall Street had been anticipating that Snap’s daily active users would reach 192 million in the second quarter, according to FactSet.

Instead, Snap reported its users were at 188 million at the end of June. While that figure was up from a year ago, it was down 2 per cent from 191 million at the end of March.

© 2018 The New York Times

First Published: Wed, August 08 2018. 21:16 IST