A Concerning History

There are other warning signs that Snap may be in trouble. According to Recode, 10 executives who reported directly to Evan Spiegel have left Snap since mid-2017. The founder and CEO is reportedly very difficult to work for, which has led to a level of executive turnover that BTIG analyst Rich Greenfield called “simply shocking.”

Snap also has a spotty history with government regulators. In 2014, Snap agreed to settle with the FTC that it had been deceiving its users about the “disappearing nature” of its Snaps. Snap was required to implement stronger privacy measures and agreed to be monitored by an independent party for the next 20 years. Also, the DOJ subpoenaed Snap in Nov. 2018, as part of an ongoing investigation into whether Snap manipulated its IPO.Big Boss vote Big Boss voteMyna nandhini

Key Challenges

Although Snap has enjoyed a recent rise in stock price, long-term trends don't bode well for the company. Snap’s revenue growth is slowing—from 103% in 2017 to 43% in 2018—and with a projected growth rate of 34%, at best, in 2019. Snap’s growth rate for ad impressions is also potentially unsustainable. According to its annual report, impressions grew 575% in Q4 of 2017, 278% in Q3 of 2018 and only 179% in Q4 of 2018. On top of that, Snapchat lost users for the first time in 2018, two million in Q3 and one million in Q4, which is a terrible sign for a business that relies on user engagement and CPM for revenue.

If recent developments continue, things may be turning around. Ad sales are up slightly, ad prices are finally rising and new products are on the horizon. Maybe momentum is beginning to shift in Snap’s favor. However, when one takes a step back, longer term numbers point to underlying instabilities in Snap’s business.

Reeling in Older Users

Snap has also expressed plans to expand their core user base to people who are 34 and older. In a memo leaked by the website Cheddar, Snap has suggested pitching its app to older users as “a fast way to communicate visually and with close friends.” But this approach was widely regarded with skepticism because other platforms offer the same services, while older users are known to find Snapchat difficult to use. Alternatively, Snap could partner with publishers who better appeal to older users to fill the discover page with content such users might enjoy. However, this is also a long shot.

International Expansion

The Android update also ties into Snap’s plans to tap into international markets. Android users vastly outnumber iOS users in developing markets, and Snap estimates its missing out on about two billion potential users because of Snapchat’s incompatibility with Android and slower network speeds. However, as with the Android update, details about Snap’s plans for international plans are few and far between.

Android Update

Snap’s biggest project for the coming year is to reengineer its Android app. Snapchat has been notoriously slow and buggy on Android smartphones, and is virtually unusable on lower-end Android devices that have slower processing speeds and lower quality cameras. Such is the curse of a social media platform based on data-intensive content like photo, video, and augmented reality. Snap’s goal is to make its Android app 20% faster in 2019. Snap executives have been cagey about when this update will be ready.

More Content

According to Snap’s fourth quarter earnings call, the company plans to respond to perceived demand for more original and user-generated content on the Discover page. This means more Snap Originals and more content from influencers. These expansions account, in large part, for Snap’s plan to deepen engagement with its core demographic—13 to 34 year-olds in the U.S. and Europe—to squeeze more ad revenue out of them.

New Products

In April, Snap announced three new products at its first-ever partner summit in Los Angeles. These include Snap Games, Snap Scan, and Snap Audience Network. Snap Games is an in-app gaming platform akin to Facebook’s. Snap Scan elaborates on Snapchat’s augmented reality capabilities, attracting developers by making it easier to add AR features to the platform. Snap Audience Network will allow third party app developers to run Snap Ads on their own platforms. In exchange for selling the ads on behalf of the developer, Snapchat keeps a portion of the ad revenue. Snap Audience Network lets advertisers reach a larger audience and means more ad revenue for Snap.