Snap Inc.'s (NYSE:SNAP) daily active users (DAUs) count disappointed for the third quarter, but the company still had some positives come out of the period.
But before we get to those, let's cover the bad news. For the second quarter in a row, Snap reported slippage in the number of DAUs: this time, a 1% sequential decline to 186 million. And the company warned investors that it expected another decline next quarter.
The stock has fallen about 55% year-to-date as investors have lost confidence in the social media platform's ability to increase its user base and revenue in the face of growing competition from Facebook's (NASDAQ:FB) Instagram. However, Snap management maintains that it has been making changes that will benefit the company in the long term, and certain figures indicate that they're working so far.
1. 200 billion saved memories
Snapchat users recently hit a milestone of 200 billion snaps saved in the Memories section of the app. This is encouraging, because it shows that users consider it the right place to store photos and videos that they expect they'll want to view again and again.
That's similar to the way Facebook's value increased for users when it became a common place to store photo albums. So too does Snap's value increase when it becomes a memory bank: The more images and videos users save there, the less likely they become to ever delete the app -- because they have too much to lose.
2. 60% of DAUs are creating snaps every day
While DAUs declined slightly last quarter, 60% of them are using the app every day to create snaps. In essence, they treat Snapchat like an everyday messaging app, using it for normal communication with friends and family, according to comments made by Snap CEO Evan Spiegel on the earnings call.
While that's an encouraging figure, the number of snaps created on the app each day fell sequentially in Q3, to "over 3 billion", versus the 3.5 billion made in Q2. Spiegel attributed that dip to the infamous redesign that Snap launched at the beginning of 2018, which led to widespread complaints from users. But the company has been working for months to address users' frustrations. Spiegel believes that as these issues dissipate, the number of snaps created will start to grow again.
3. Trailing 12-month revenue is up 53%
Snap's revenue has been steadily increasing, mainly thanks to its new self-service advertising model. In Q3, revenue increased 43% to a record $298 million. And over the past 12 months, Snap's revenue rose 53% to $1.1 billion.
Switching to that self-service ad model was the best thing Snap has done for itself in the past few years. For the quarter, more than 85% of its ad revenue came via self service, up from 35% in the year-ago period.
4. Users spend more than 30 minutes a day on the app
Snap said that its users continue to average more than 30 minutes per day on the app. Furthermore, the company hopes that metric will improve as it adds helpful features like Memories and entertaining features like Snappables -- its new augmented reality (AR) games in which your moves are controlled by your facial expressions. One of those, Tic-Tac-Toe, had over 80 million unique users in the third quarter.
5. 21 of its Shows reached monthly audiences of 10 million people
Another way Snap hopes to increase user engagement is through its Show section, which offers premium original content. Last quarter, 21 of Snap's original shows had monthly active audiences in excess of 10 million. The company noted that viewership for its premium content has increased markedly since it rolled out its redesign.
A few days after its financial report came out, Snap announced that it had made deals with 17 media partners in the U.K. -- among them, The Guardian, Vice, Sky News, and Culture Trip -- to launch 25 new Shows on the app. These three to seven-minute shows will give Snap another tool in its ongoing competition with Instagram, which has started ordering content for its new IGTV offering.
While Snap still needs to prove that it has long-term growth potential -- and that it can provide something Instagram doesn't -- this past quarter did offer some encouraging signs for investors. The most gripe-inducing aspects of the redesign have been worked through, and the company has launched some new and exciting features to provide a better experience for users. But only time will tell if these changes will result in higher engagement and improved user growth rates.
Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool is short November 2018 $155 calls on Facebook and long November 2018 $135 puts on Facebook. The Motley Fool has a disclosure policy.