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Snapchat halts decline by adopting a social commerce strategy

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Snapchat owner Snap has posted results for Q4 2018 that show that it has stemmed the decline in users – largely thanks to its shift towards encouraging ecommerce from its site and a subsequent lift in mobile ad revenues.

Revenues at the social site increased 36% to a record $390 million in Q4 2018, compared to the prior year, while operating loss improved by $166 million to  loss of $195 million in Q4 2018, compared to 2017.

Daily Active Users stood at 186 million in Q4 2018, compared to 187 million in Q4 2017 and 186 million in Q3 2018. In Q4 2018, Snap’s iOS DAU increased both quarter-over-quarter and year-over-year and average time spent on iOS grew faster during Q4 2018 than during Q4 2017.

This has been driven to a large extent by the company becoming more ecommerce friendly, building on its partnership with Amazon, the launch of product catalogs [sic] and the introduction of shoppable ads.

Its partnership with Amazon allows Snapchat users to use the social app to snap things they like the look of and then buy them via Amazon. The Snap Product Catalogs, the company says, offer a simple, scalable way for eCommerce businesses to use their websites to create Snap Ads.

These ads allow a brand to feature a collection of products on their Snap Ad, where users can tap directly to the product details. Initial testing back in October showed strong performance for some of the world’s biggest brands. For instance, eBay saw a five times higher engagement rate with Shoppable Snap Ads compared to standard Snap Ads featuring the same products.

The strategy has also embraced tie ups with media companies to help drive shoppable advertising uptake.

“Our commitment to providing high quality, made-for-mobile video experiences across the Snapchat platform is yielding positive results,” says the company in a trading statement. “30% more people are now watching Publisher Stories and Shows every day compared to last year and each person is consuming more of these Stories per day on average. In Q4 2018, more than 60% of ESPN’s ‘SportsCenter’ audience tuned in three or more times per week. ‘Dead Girls Detective Agency’, a new Snap Original Show produced by our joint venture with NBCUniversal, reached more than 14 million unique viewers and more than 40% of the users that completed the

first episode went on to watch the entire season.”

Meanwhile, Bitmoji Stories, a new cartoon starring Snapchatters and their friends, reached some 40 million viewers in December. NBC News announced that two thirds of the 25 to 35 million Snapchatters watching its Stay Tuned show represented a net new audience for them

Josh Krichefski, CEO of digital agency MediaCom UK comments: One of its problems has been remaining relevant to its younger audience – yet according to Ofcom, children aged between 12-15 are using Snapchat more now than they ever have done. Its biggest challenge, however, is gaining a slice of the slightly older audience now turning their heads to other forms of social media, notably Instagram.”

He concludes:“To combat this, Snapchat cleverly partnered with Amazon last year to allow users to scan and purchase products instantly. It was a necessary reaction to Instagram’s social shopping function and Pinterest’s product tagging tool to keep audiences’ attention for longer than 10 seconds or 24 hours and move into a sort of eCommerce model increasingly found on social media. The initial model that Snapchat was solely built on has massively shifted with brand partnerships and leading news sites like Sky News valuing the opportunity to connect with a younger target market. It’s this exact focus on the audience, what they want and how to best appeal to them, that will be key for the platforms and also the advertisers. Snap will need to continue innovating this year to not just react to its competitors, but force their hand and be the prime mover instead.”

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