Snapchat Stocks Soar 20%, Keeps 186M Users In Q4

Wall Street is cheering to news that Snapchat had neither lost that many nor gained that many users during the fourth quarter of 2018. This measure of relief saw Snapchat’s stock jump nearly 20 percent in after-hours trading Tuesday.

One analyst described this stalemate as "a positive sign" for the company after a prolonged and painful drop in user numbers over the past few years. The management at Snap, Snapchat’s parent firm, also breathed a sigh of relief.

Snap reported it had 186 million daily users in Q4, unchanged from the third quarter. This status quo ended a streak of two consecutive quarters of falling user numbers.

In October 2018, Snap said it expected its user numbers to continue declining during the holiday quarter. Snap interim CFO Lara Sweet on Tuesday said the company is "cautiously optimistic" that daily users won’t drop in the first three months of 2019 -- hopefully.

Despite the stunted growth, Snap did somehow create more revenue from its stagnant base of users. Its revenue for Q4 hit a record $390 million, 36 percent higher than the same period in2017, and $10 million above the high-end of its own projections for the quarter.

"In 2018, we focused on building a foundation to scale the business over the long-term by driving sustainable product innovation, scaling our advertising platform, and hiring the leadership team that will help us achieve our future goals," said Evan Spiegel, Snap's CEO and co-founder. "We ended the year with user engagement stabilizing."

The company shared an update of its long-awaited Snapchat Android app redesign, which might be a key factor in future growth. Spiegel said Snap’s engineering team remains focused on rebuilding its Android app to improve performance and quality.

He noted that early tests show promising results, “especially on less performant devices, including a 20 percent reduction in the average time it takes to open Snapchat.”

Siegel said that given these results, Snap has started rolling-out the new version to a small number of users.

The loss of users was the result of a controversial redesign of the Snapchat app in early 2018. This ultimately misguided move was intended to revive user growth but attained the opposite result.

The redesign segregated content posted by a user’s friends from those posted by publishers and celebrities. The goal was to make Snapchat's baffling interface less perplexing. Snapchat users rebelled against the change. It eventually redesigned the redesign after receiving tons of criticism online and from celebrities such as reality TV star Kylie Jenner.