Snapchat is currently experiencing a revival with increasing user numbers. But the advertising business is declining, so sales of the photo app are shrinking at the same time. New ideas should end the crisis.
It was a new idea that was very well received by young people: taking photos on cell phones or smartphones that – hardly sent – disappear again on their own. Snapchat was launched in 2011 and has grown rapidly and strongly over the years. But that did not go unnoticed.
Competition from Instagram and TikTok
Instagram, Facebook, TikTok or WhatsApp now also offer these and even more functions. Instagram and TikTok in particular are now much more popular. Nevertheless, young people in particular are using the app – again. What began twelve years ago has been revived in recent months. And so in the past quarter the number of users rose from 375 to 383 million.
However, the revival is not reflected in the balance sheet: The photo app Snapchat has reported a decline in sales for the first time: within three months it shrank by seven percent to $ 988.6 million. The parent company Snap Inc. had already announced a decline in sales at the end of January. Despite this, the company failed to meet analysts’ expectations. At least Snapchat trimmed its quarterly loss.
The stock market punished the makers of the photo app. The share lost a fifth of its value in New York. Over the course of a year, the stock has plummeted 70 percent. Instead, other US app titles performed much better. The Meta share gained 15 percent within a year, and 98 percent in the current year alone. Alphabet became 10 percent cheaper over the year, and this year is up 21 percent.
“Digital mirror” for virtual fittings
The company is now trying to connect digital effects with the real world: These new ideas are still of little use: Snap recently introduced a “digital mirror” for shops. This allows users to “try on” sunglasses, clothing or shoes on site in the display. On the screen it looks like you are actually wearing the products. Snap now wants to sell this virtual fitting beyond its own platform and thus spread the offer more widely. The first customer is the sunglasses supplier Goodr.
According to Snap, however, it is not yet possible to buy the selected products directly via the smartphone app. So far, Snap had only offered so-called augmented reality (“augmented reality”) for fun: users could already try on fashion or accessories virtually on Snapchat and take photos.
At the same time, Snapchat uses the global chatbot trend: Snap wants to make its MyAI text robot available to all users free of charge. With MyAI you can talk to a real person. Previously, only Snapchat+ subscribers had this option. In Germany, the service costs EUR 3.99 per month.
Problems with online advertising market across the industry
But many app providers have one problem in common: the decline in the online advertising market. Other companies such as Google’s parent company Alphabet or the Facebook group Meta are also feeling the effects. Business has not only been suffering since the economic headwind, but above all from the effects of Apple’s data protection changes since 2021: since then, users have been able to refuse the collection of their data for advertising purposes.
However, data is immensely important for the advertising business: Snap generates income from advertising, from very targeted advertising. The Snapchat service is free for users. However, Snap assumes that the advertising market will recover. The two largest digital platforms Meta and Alphabet posted positive quarterly results this week despite the difficulties in the advertising market.