Snap Q2 Preview: Will The Latest App Updates Bring Things Back On Track?
Snap is expected to publish its Q2 2018 results after the bell on Tuesday, August 7. The first quarter proved to be relatively challenging for the company, as it faced slowing user growth following an app redesign that didn’t go over well with its core customers. However, Snap has been taking measures to fix these issues over the last few months, and we will be looking for the impact of these steps during the company’s Q2 call.
We have created an interactive dashboard on what to expect from Snap through 2018 outlining our forecasts for Snap over the year. You can modify the key drivers and forecasts to arrive at your own price estimate for Snap.
How Will Snap’s Daily Active User Base Trend?
Over the first quarter, Snap added just 4 million users, while indicating that its daily active user base actually fell below the quarterly average of 191 million during the month of March, due to user dissatisfaction with its redesigned app. However, over the last few months, Snap has been rolling out a new version of the Snapchat app that attempts to fix many of the user interface issues that plagued its major redesign. With the new update, Snap is addressing key problems, including repositioning the Stories page to the right of the main Camera screen, while ordering Snaps and Chats chronologically (rather than algorithmically) on the Friends page. We will be looking for the impact of these updates on the company’s user additions over the quarter.
Lower Ad Rates Could Impact Revenue Growth
Snap’s year-over-year revenue growth is expected to decelerate significantly over Q2 compared to Q1 levels, as the company continues to reduce ad rates amid a shift to programmatic advertising. While the company has been increasing its ad impressions significantly, with 95% of impressions served programmatically in Q1, the lower rates compared to direct sales could hurt revenue growth. During the first quarter, overall Snap Ad pricing, excluding Story Ads, was down by roughly 65% year-over-year and by about 20% sequentially.
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