Please ensure Javascript is enabled for purposes of website accessibility

Snap Has Morphed Into a Major Facebook Competitor

By Daniel Sparks - May 21, 2021 at 7:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With 500 million monthly active users, the photo- and video-sharing app is now a force to be reckoned with.

Thursday was a big day for Snap (SNAP 2.26%), the parent company of photo- and video-sharing social media platform Snapchat. The company said its monthly active users crossed 500 million for the first time.

While the figure is a far cry from the billions of monthly active users Facebook (META 1.88%) has, the achievement is impressive given the fact that Snap has been up against some vicious competition: Facebook's Instagram.

"Snap Inc" on a yellow background

Image Source: Snap.

A major milestone

Unfortunately, we don't have any reference for how fast Snap's monthly active users are growing. This is the first time the company has shared a monthly active user metric. Snap typically reports daily active users.

Nevertheless, this figure gives us some context to compare Snap's platform with Facebook's. Social network giant Facebook had 2.85 billion monthly active users as of the end of its first quarter. This was a 10% year-over-year increase. While Facebook's Instagram no longer reports monthly active users, the social network hit 1 billion users in the summer of 2018. Further, Facebook does share its total unique monthly active users across all of its social networks. This figure hit 3.45 billion in Q1, up 15% year over year.

Snap's 500 million monthly active users may be far from Facebook's reach, but it's big enough to pose a serious threat to the social network giant.

Rapid growth

Though we don't know how fast Snap's monthly active users are growing, it's likely fast. After all, daily active users reached 280 million in the company's first quarter of 2021. This was up 22% year over year. Comparatively, Facebook's first-quarter daily active users grew 8% year over year to 1.88 billion, and all of Facebook's social networks combined saw unique daily active users grow 15% year over year to 2.72 billion.

Capturing Snap's momentum in attracting and retaining users, the company's 22% growth in daily active users in Q1 was its highest growth rate in more than three years.

"A lot of this growth has been unlocked through our ongoing investments in improving the performance and stability of our products across a wide variety of regions and devices," said Snap CEO Evan Spiegel in the company's first-quarter earnings call.

Indeed, Snap's photo- and video-focused social network is actually benefiting from a reopening economy. In late February, Snap saw an inflection in story posting, new friendships, and communication in broader groups. "We designed Snapchat to be a useful complement to real-life friendships," said Spiegel.

While Snap's rapid growth and impressive size aren't enough to make me concerned about Facebook's ability to do well over the next 10 years, it does suggest that the younger social network may be gaining enough traction to challenge Facebook and keep it on its toes.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Snap Inc. Stock Quote
Snap Inc.
SNAP
$10.41 (2.26%) $0.23
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$170.25 (1.88%) $3.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.