EMarketer: Snapchat user base will dip in 2019 for first time

Brief:

Snapchat's U.S. user base will decline for the first time this year as mobile users spend more time on rival Instagram, researcher eMarketer predicts. Snapchat's monthly users will slide 2.8% to 77.5 million, reversing an earlier forecast that had predicted 6.6% growth to 90.4 million this year.
Instagram, which has copied several popular Snapchat features over the past few years, will be the biggest beneficiary of Snapchat's decline. Instagram's U.S. user base will grow 6.2% to 106.7 million users this year, outpacing the broader industry's growth, eMarketer says. The researcher predicts that Instagram will add 19 million new U.S. users by 2023.
Snapchat's growth is set to rebound next year but remain relatively flat, as the image-messaging app will only add about 600,000 new U.S. users over the next four years to reach 78.1 million, per eMarketer.

Insight:

EMarketer's forecast comes a week after Snapchat's parent company Snap revealed plans to boost its reach with an audience network, original shows and videogame platform. However, those initiatives may not win over many new users as more established rivals like Facebook, Google and Amazon expand their digital reach with similar strategies to engage mobile consumers with a mix of content and commerce.

Snapchat's growth rate of 0.4% won't keep pace with the 2.4% increase in social network usage next year, eMarketer predicts. Its share of U.S. social network users will fall to 37.9% this year from about 40% in 2018. EMarketer said Snapchat's redesigned app, which mixed chats with "stories" that disappear after 24 hours, was confusing and alienated many users, forcing the company to scale back changes to stop the bleeding of user loss.

While Snap hasn't reported any global user growth since Q1 2018 and has never been profitable, the company has managed to better monetize its user base with solid increases in revenue. It reported a 36% gain in revenue to $389.8 million in Q4 2018 amid a 179% surge in ad impressions. The company is taking steps to broaden the reach of its ad products with planned launch of the Snapchat Audience Network, and this week finally released a redesigned app for Android phones that eliminated many bugs. While it's too early to tell how these initiatives will help the company boost its user base, Snapchat is at least taking steps to keep existing users engaged.

After eMarketer released its report, Snap's shares dropped as much as 5% and the company questioned the researcher's methodology. EMarketer defended its estimates later on Wednesday, Variety reported. The Pew Research Center reinforced eMarketer's estimates with a survey that showed slight declines in U.S. adult usage of Snapchat, Twitter, Pinterest and WhatsApp since last year. Instagram, Facebook and LinkedIn had slight upticks in usage, while YouTube was little changed as the most popular online platform. Facebook's data-sharing controversies have had little to no effect on usage of its platform, the survey found.