Despite a strong third quarter, Snap's future there are still concerns about future growth thanks to growing competition from other youth-targeted apps like TikTok.
Snap reported earnings after the bell on Tuesday. The company posted a 4 cents per share loss, beating the Refinitiv analyst estimate of a loss of 5 cents a share. It also had higher-than-expected revenue for the quarter, bringing in $446 million versus the $435.1 million estimate.
The report also noted that about 210 million accounts use Snapchat on a daily basis, above the 207 million user estimate. Each daily user opens the app about 30 times.
But despite the earnings wins and stock prices that have skyrocketed 154 percent year-to-date, Snap's fourth-quarter guidance came in a little lighter than analysts expected. The company advised revenue would be $540 million to $560 million next quarter. Analyst estimates from Refinitiv expected the company's midpoint revenue to be at $555.4 million.
Snap pitches its advertisers heavily on the fact that its app Snapchat is one of the only places to reach younger audiences who may no longer be watching traditional media like television. The company claims to reach about 90 percent of 13- to 24-year-olds in the U.S., and three-quarters of 13- to 34-year-olds.
"Snapchat helps brands reach Millennials and Gen Z, hard to reach and highly coveted audiences," Snap chief business officer Jeremi Gorman said during an investor call on Tuesday. "Together, these generations have over $1 trillion dollars in direct spending power, and they are not as active on more traditional advertising mediums. Meaning to reach them, marketers need to find them on immersive mobile platforms, like Snapchat."
However, Snapchat may not be the platform of choice for younger generations in the future. Video editing platform TikTok is already pulling in a strong youth base, despite only being a year old. According to Apptopia, about 48 percent of TikTok's users are under 20, or about 288 million of their estimated 600 million monthly active users.
"Snap's user base may be growing, but it now faces fierce competition not only from Instagram but also from TikTok when it comes to attracting advertisers eager to reach younger audiences," social media marketing platform Socialbakers CEO Yuval Ben-Itzhak said via email. "There was a time when Snap was considered indispensable for reaching this younger market. But today, in addition to the ongoing threat from Instagram, many marketers see TikTok as the most relevant platform for reaching teens and young adults."
Only 67 million of Snap's user base are in their teens, per Apptopia data, and the 297.7 million monthly active user estimates from eMarketer doesn't indicate the growth of habitual daily users. (Snap does not disclose monthly active users, only daily active user rates.)
"Competition from upstart social platform TikTok is still looming, however, and it could lead to lower engagement for Snapchat in the future because both platforms target the youth audience," said eMarketer principal analyst Debra Aho Willaimson via email.
Meanwhile, multiple publishers told Cheddar the cost of creating original, bespoke content for Snapchat was often not worth the ad revenue it would receive for the projects.
Snapchat is relying on original series to help draw in new users and keep them on the platform longer. Viewing times on the platform has increased 40 percent year-over-year, said Snap CEO Evan Spiegel on a call with investors on Tuesday.
"Time spent and viewership on our content platform continue to grow rapidly, with more than 100 Discover channels reaching a monthly audience of over 10 million viewers in Q3," he said.