Snapchat’s anemic user growth is impacting its cool quotient among advertisers

FILE PHOTO: The logo of messaging app Snapchat is seen at a booth at TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson/File Photo - RTS1686L

The ad business loves its shiny new toys. And until recently, Snapchat was the shiniest. But that may not be the case anymore.

Snap fell short of revenue expectations, and its net losses climbed to $443 million compared to $116 million at the same time last year.  And while it amassed new users, that too was short of analyst expectations.

The platform managed to attract only 7 million new daily users during the quarter, while analysts expected an additional 10 million. Of these, 4 million came from the US and Canada.

Ad buyers go where the audience is, the question now is whether fickle ad buyers will be less interested as its audience growth sex appeal fades.

“I think the slow growth is going to make advertisers – and agencies who operate on behalf of advertisers – pay closer attention to these numbers and other reports on consumer behavior and adoption on the platform moving forward,” said Brittany Richter, vice president and head of social media at iProspect.

Richter said she didn’t expect marketers to cut back on spending immediately. But Snapchat doesn’t have a lot of leash going forward.

“I think they have a small window of time to prove that their ad capabilities work for brands and to find ways to keep and grow their audience,” she said.

Fair or not, big marketers are drawn to platforms that are growing fast, and are perceived as ‘hot.’ Snapchat may suffer for being seen as less than sizzling.

“Platforms in high-growth mode do tend to command a premium, because marketers will pay more to place messages a new thing that seems ‘hot,” said Ben Kunz, executive vice president of marketing and content and Mediassociates. “Advertisers like to think they are logical, but there is an emotional itch to chance the new shiny thing.”

In other words, Snap better pull up its socks, and continue to attract users if it ultimately wants to attract advertisers.

“If Snap’s user growth plateaus — and even becomes stable — a lot of interest may fade away,” said Kunz. “Then it will just be like advertising on People.com, and the only criteria will be ‘what’s your [price]?’”

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