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Snap, Inc. Hints That It Has Over 260 Million Total Users

By Evan Niu, CFA - Feb 19, 2017 at 1:00PM

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It depends on how Snapchat defines its community.

Snap (SNAP -0.95%) has disclosed, in its S-1 Registration Statement, that the company's flagship Snapchat platform now has 158 million daily active users (DAUs). This DAU base also serves as the basis for how Snap calculates average revenue per user (ARPU), which is slightly different from other social networks, which often calculate ARPU based on monthly active users (MAUs).

However, Snap has decided not to directly disclose how many MAUs it has, opting to only detail its DAU levels -- which are already starting to see signs of rapid deceleration in sequential growth. Well, Snap has just put out its IPO roadshow presentation ahead of hitting the road, and hinted at how big its total user base really is.

Snapchat logo

Snapchat logo. Image source: Snap.

How does Snapchat define its community?

During the presentation, CTO Bobby Murphy noted that approximately 60% of the Snapchat community Snaps every day. This is a relatively solid ratio of daily engagement that's comparable with other social networks. Using that figure, we can back into Snapchat's total user base, which should be approximately 263 million users.

Chart showing increasing daily active users.

Snapchat's daily active users worldwide. Image source: Snap S-1.

What's less clear is what qualifies as Snapchat's "community." Is Murphy referring to total registered users, or MAUs? That distinction is also important, since Snap can still monetize MAUs that use the service, even if it's less often than DAUs. But if Snap is including registered users who have created accounts, but never use Snapchat, then it goes without saying that it cannot monetize inactive, but registered, users.

Will Snapchat ever truly be mainstream?

The mere fact that Snap is choosing not to disclose MAUs is a little disconcerting in itself, since the decision invites both speculation and scrutiny as to why Snap isn't letting investors know how many MAUs it has.

Assuming the "community" includes MAUs, it's not as if Snapchat has some embarrassingly poor daily engagement ratio if 60% of users are Snapping every day. And you can't argue that MAUs are not important to investors, as every social media company discloses MAUs, since it's an extremely important operating metric.

Now that Snap has hinted at its total user base, regardless of whether it's including all registered users or MAUS, this engagement ratio will be an important metric for investors to track, assuming that Snap provides updates going forward as to how engaged its user base is. There's a decent chance that Snapchat will prove to be a niche service that doesn't make it to mainstream adoption. Whether or not it does will be vital to living up to the lofty valuation that the company's already fetching.

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