Snap Inc.'s share price stumbled Wednesday after the company disclosed user growth that failed to meet Wall Street expectations. But the reaction to user trends obscured gains for Snapchat's programmatic advertising platforms.
"Their programmatic offering is working," said Martín Utreras, eMarketer's vice president of forecasting.
Utreras noted that Snap's second-quarter revenues rose despite declines in user engagement and ad prices. In other words, "programmatic is being driven by strong advertiser demand," he said.
Snap's second-quarter revenues jumped 44% over the year-ago period, and average revenue per user rose 34%.
The positive programmatic trends were initially overshadowed by concerns about user growth. The company said the number of daily active users (DAUs) in the second quarter was 188 million, up 8% from the same quarter last year, but down from Q1 2018.
Concern about Snapchat's user growth in some ways misses the platform's key feature: its appeal to young users. We estimate Snapchat's penetration rate among teenagers and young adults approaches 95% of all social network users.
And those young users continue to favor Snapchat over other platforms, even in the wake of a widely criticized redesign that launched in November 2017.
eMarketer will publish updated estimates for Snapchat in mid-August. (The complete forecast will be available only to eMarketer PRO subscribers.)
But our initial assessment is that changes to the forecast will be relatively minimal. The decline in DAUs isn't really a sign of user abandonment, according to Utreras. Rather, it reflects annoyance with ongoing design changes.
"We still expect single-digit growth for monthly average users [MAUs] for the US base overall," Utreras said.