Earlier this week, the social media and advertising firm Snap released Q4 2018 earnings. Although Snap seemingly did not have a good 2018, with 5 million users leaving Snapchat (where posts disappear in 24 hours), earnings results were surprisingly positive and exceeded investor expectations. Snap's emphasis on advertising has helped it raise revenue per user, a key advertising metric. Furthermore, user growth appears to have somewhat stabilized, following the firm's commitment to addressing issues noted with its deeply unpopular redesign of the app. The market rallied in response, with Snap spiking nearly 20% following earnings release. This was enough of a comeback to signal that Snap isn't disappearing anytime soon.
Looking back, there are a number of reasons that led to Snap bottoming out last year. With the intense competition among social media platforms, and increasing saturation in the market, Snap struggled to keep up with rivals Facebook and Instagram (owned by Facebook). Snap's ever popular 'story,' which allowed real-time captures of user happenings via live stream, was integrated in Facebook's app and messaging service as well. This represented a push from Facebook to lure users back to Facebook as a 'one stop' app meeting their needs. Instagram also has taken the social media world by storm, with accelerated user growth and premium advertising space. At a time where Facebook is facing daily headlines, many mired in scandal and concern, Instagram remains a popular favorite.
Looking ahead, Snapchat will need to demonstrate sustained growth to persuade investors - and advertisers - that turning a profit is not a short-lived story.
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