Snap (NYSE:SNAP) caught a lot of flak from users and critics for its Snapchat redesign that separated friends and family posts from those of commercial interests, including celebrities. Despite near universal criticism, downloads of the app went from being down 35% year over year prior to the redesign to being down only 8% from the prior year a week after its release.
More than likely that's just a lot of people interested in finding out what the hullabaloo was about and if the redesign was as bad as everyone said, but Snapchat has an even bigger problem that could ultimately sound a death knell for its success: Older people are increasingly using the app.
Not so hip to be square
According to the researchers at eMarketer, Snapchat usage is growing, but it's because the age of the typical Snapchat user is rising. In 2015, nearly 28% of users were between 12 and 24 years of age while 11% were 25 to 34 years old. However, it forecasts that by 2021, users between 25 to 34 years old will be the single largest demographic, accounting for more than 24% of its base.
Worse, from a kid's perspective, is that grandparents are the fastest growing age group of Snapchat users. Usage among teens 12 to 17 years old grew by 29% in 2015, but is expected to steadily decline to the point where it only accounts for 0.7% growth in 2021, and user growth among those 18 to 24 year old will also taper off. Meanwhile, Snapchat usage by those 55 and older is projected to be its greatest source of growth from 2018 on -- that cohort is expected to account for 58% of the app's growth this year.
What could make this all the more devastating for Snap is that this is all planned. CEO Evan Spiegel said "We believe that the redesign has also made our application simpler and easier to use, especially for older users," making it clear that Snap is actively pursuing these users.
Yet like the Steve Buscemi scene from 30 Rock where he goes back to high school carrying a skateboard over his shoulder, wearing his ball cap backwards, and says, "How do you do, fellow kids," there's nothing like an app becoming your parents' (or grandparents') favorite social platform to kill the buzz among tweens and teens.
A place of their own
While teens migrated to Facebook (NASDAQ:FB) after the demise of MySpace, the social networking site was always seen as the hangout for adults while the latter was viewed as the favorite of kids. Now with Instagram and Snapchat available, Facebook is hemorrhaging younger users.
eMarketer estimates Facebook lost 2.8 million users under the age of 25 last year and predicts another 2.1 million will abandon the platform this year. The steepest drop is among those 12 to 17 years of age.
While the losses are a result of there being alternative social media platforms available to use, it also underscores the fact that kids don't want to hang out where their parents do.
A silver (haired) lining?
Of course, it's possible that even though using Snapchat might not be considered cool if grandma is sending snaps, the expanded user base could still allow Snap to grow to a size where it doesn't matter. Facebook, after all, remains massively popular and profitable despite its more mature demographic. Facebook's net income surged 56% in 2017 to $15.9 billion, so it may be OK to be uncool if you can grow to a critical mass.
It's not certain that Snap can, however, which is why the app redesign remains problematic. If Snapchat users abandon the platform because they find the interface clunky, all those new downloads won't convert into users who spend significant time on the app and engage with it.
Snap's not Facebook, and it is exceptionally unprofitable at the moment, having lost $350 million last year. Add in a good dose of no longer being hip and Snapchat may have a problem bigger than an unpopular app redesign.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer and Facebook. The Motley Fool has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy.