Snapchat's strength has always been its popularity among young people. But that popularity has been called into question since Snap (NYSE: SNAP) went public and showed slowing user growth while Instagram's user growth accelerated. The Facebook (NASDAQ: FB) subsidiary's most recent sign that it's stealing engagement from Snapchat was an announcement that its younger users spend over 30 minutes per day in the app on average. That came just ahead of Snap's second-quarter earnings report.
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But Snapchat is still extremely popular among smartphone owners under 25 years old. A recent survey from ComScore found it was the third-most popular app among 18 to 24-year-olds in the United States, just behind YouTube and Facebook. Snapchat notably fell to sixth in the 25 to 24-year-olds, and missed out on the top eight in older demographics while remained popular for users up to 54 years old.
Snap's earnings report corroborates those survey findings. Near the end of the company's conference call, CEO Evan Spiegel told analysts the average user under 25 years old spends 40 minutes per day in the app.
Where is Snapchat's growth coming from?
Instagram continues to grow in popularity, and young people are spending an increasing amount of time in the app every day as it adds new features (it copies from Snapchat). But Facebook hasn't been able to replicate that same success with its flagship app. Its implementation of Stories hasn't garnered the same attention as Instagram Stories, and teens are starting to use the app less. A recent report from eMarketer found 1.2% of teens in the U.S. left Facebook last year, and it expects that number to accelerate this year.
Likewise, Twitter (NYSE: TWTR) is losing users in the United States. Last quarter, the company reported a drop of 2 million U.S. users to fall to 68 million. That's up just 3% from a year ago, and Twitter faces seasonal challenges in the second half of the year, which could lead to even slower growth.
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There are only so many hours in a day. The average 18 to 24-year-old spends 3.2 hours using apps every day, and the average person spends about half that time in a single app, according to ComScore. If a person loves Snapchat and Instagram, that doesn't leave much time for anything else.
But older users still aren't getting on board
The concentration of app usage is not unique to young people, however, so Snapchat's inability to resonate with an older audience also means it's not seeing the same level of engagement from older people. Indeed, Spiegel said users over 25 years old are still spending "over 20 minutes per day" using the app -- the same amount of time they spent last year. By comparison, young users engagement has moved from "over 30 minutes" to "over 40 minutes" per day in the same period.
ComScore's survey found Snapchat's popularity falls off as users get older. Comparatively, Facebook's flagship app tops the chart for older users and Instagram remains popular even among younger users as well.
Snap's management seems fine with its user base concentrated among young people. Young people are extremely attractive to brand advertisers, and most of Snapchat's ad formats are designed for brand advertising.
But as Snap moves into more auction bidding for ads, and more targeted ads, it may find its lack of a more diverse user base is detrimental. Snap already noted auction bidding had a negative impact on average ad prices, but it expects prices to increase as more bidders join the auction. Attracting more advertisers requires a wide range of users like Facebook has and strong returns on investment. Snap may find new advertisers don't join the platform as quickly as expected.
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