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Snap starts adding users again

Snapchat is growing again.

Its parent company Snap said on Tuesday that the messaging app had 190 million daily active users during the first three months of 2019, up from 186 million daily users the previous three months and better than investors had expected.

Snap’s revenue for the quarter surged by 39%, hitting $320 million and topping Wall Street estimates. On a call with investors, CEO Evan Spiegel touted Snapchat’s transition to self-serve ad products and its appeal to a younger audience.

Snap shares rose as much as 10% in after hours trading Tuesday immediately following the earnings report, before giving up much of those gains.

The results should help the narrative that Snap is making progress on turning around its business. Snap said in February that it had finally stopped losing Snapchat users. Snap’s stock had more than doubled so far this year, prior to Tuesday’s earnings report.

The company said it has completed the rollout of its new Android app, which could be key to it continuing to add users. Snap said the new app opens 20% faster on average and should be a better experience for users even on lower quality phones. Previously, users complained about the Android app crashing and having poor camera quality.

“The revamped Android app could drive more gains in subsequent quarters if a significant number of people start using this version of Snapchat. A sizeable chunk of the world’s smartphone user base is on Android,” said Debra Aho Williamson, principal analyst at eMarketer.

But Spiegel acknowledged Snap will have to win back Android users who had a poor experience with the old app.

“It’s going to take time to rebuild that trust. The best way for us to do that is deliver on the product,” he said. “It’s going to be a process.”

At an event earlier in April, Snap teased new monetization and advertising opportunities, including six-second ads in games.

“As of March, our ads can now reach more 13 to 34 year-olds than Instagram in the United States,” Spiegel said, in a rare swipe mentioning the company’s chief rival by name.

Analysts have generally been more upbeat about the company in recent months. In March, Jefferies analysts said they “felt like [Snap] had grown up from a startup to a more mature company” after visiting the company’s Santa Monica headquarters.

It’s a remarkable shift in investor sentiment for the company. Last year, Snap struggled with an unpopular redesign of its iOS app, its first-ever declines in daily active users, a slew of executive departures and increased competition from Instagram.

There are still challenges ahead. Snap lost $310 million in the first three months of the year — that is a 20% improvement from the more than $385 million it lost in the same period a year ago, but still a long way from getting out of the red.

Snap also implied that user growth in the next quarter could be weaker.

“While we are not going to give specific guidance on daily active users, we have previously seen stronger daily active user growth rates in Q1 when compared to Q2,” Snap’s interim CFO Lara Sweet said.

 

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