(Reuters) – Snap Inc. lost more users than expected on Wall Street in the third quarter as it continued to engage in an unpopular redesign of its Snapchat photo messaging app and fierce competition from Facebook Inc. Instagram.
FILE PHOTO: The Snapchat Messaging application will appear on a phone screen on August 3, 2017. REUTERS / Thomas White / File Photo
It is expected that daily active users will fall again in the next quarter, said Snap Chief Financial Officer Tim Stone to analysts during a telephone conference that would mark the third consecutive quarter of user decline.
Fast stocks, which have lost more than 52 percent since the beginning of the year, fell 10 percent in afternoon trading as the company failed to convince Wall Street in 2019.
During the call, Stone awakened hope that Snap had determined to achieve profitability for full-year 2019. This ambition was described earlier this month in a leaked internal memo by Chief Executive Officer Evan Spiegel.
"Remember that an internal route target is not a forecast or an orientation," said Stone.
Snapchat's daily number of users dropped to 186 million in the quarter ended September 30, compared to 188 million three months earlier. The number of active users was 178 million in the same quarter last year.
Spiegel said the company was planning to add users by serving older users in the US and Europe and expanding internationally to reach 13- to 34-year-olds, the demographic core of the app.
However, one of Snap's biggest problems is that it "has an unclear idea of how to go beyond the under 30s in a very crowded social media landscape," said Jessica Liu, an analyst at Forrester.
Recent user numbers, which have been widely observed by investors and advertisers, were also below the analysts' average estimate of 187.56 million, according to Refinitiv.
Wall Street had expected Snapchat users to reach 192.84 million in the next quarter.
The redesigned Snapchat app, which aims to create a more personalized service, has struggled to attract more users since its launch last year, and newer versions have been criticized for being too confusing to use.
The number of advertisers active on Snapchat is low compared to Facebook and Instagram, but it is rising steadily, according to Stifel's analysts on Wednesday, citing data from Merkle.
However, the company outperformed analysts' sales expectations and the average revenue per user increased. Sales growth was aided by increased adoption of the company's programmatic ad sales platform, said Snap's head, Evan Spiegel, in prepared statements.
Snap's total revenue increased 43 percent to $ 297.7 million, exceeding Wall Street's expectations of $ 283.2 million.
Average revenue per user increased to $ 1.60 in the third quarter from $ 1.17 in the prior year, driven by growth outside North America.
The net loss decreased to $ 325.1 million, or 25 cents per share, compared to $ 443.2 million or 36 cents per share a year ago. Adjusted, Snap lost 12 cents a share while analysts expected a loss of 14 cents per share.
Snap also said fourth-quarter revenue will be between $ 355 million and $ 380 million. Analysts expected sales of $ 371 million.
Earlier this month, Snap announced new scripted shows for Snapchat to attract users and increase the time they spend on the app. Snap said the serialized episodes will be ad-supported and fast for mobile viewing.
Snap said Wednesday that Jeremi Gorman, head of Amazon's global advertising sales force, was hired as Chief Business Officer. It also hired Jared Grusd as Chief Strategy Officer. Grusd was CEO of the media site HuffPost.
Report by Vibhuti Sharma in Bengaluru and Sheila Dang in New York; Cut by Sai Sachin Ravikumar and Meredith Mazzilli