Snap’s (SNAP) growth in users for its Snapchat software program in Q4 was probably a little better than previously expected, writes Deutsche Bank’s Lloyd Walmsley, but company is still struggling to get people to use newer features of its app, such as the “Bitmoji” cartoon avatars, according to a survey of 525 Snapchat users conducted by Walmsley in December.
Walmsley, who has a Hold rating on Snap stock, raises his price target to $13 from $11. Walmsley thinks Snap added 6 million users in Q4, from Q3’s level, for a total of 184 million “daily average users,” slightly higher than the 4 million Walmsley had originally modeled.
Walmsley’s survey, conducted from December 22nd to 29th, posed questions to 420 people who were daily users of the platform, and 105 who were less-frequent users. This was Walmsley’s second survey of the platform, the first having been back in March, when Walmsley at the time initiated coverage of the stock with a Buy rating, and a $30 price target.
Use of the platform has remained “solid,” writes Walmsley, with fewer people ceasing to use the software:
Respondents overall see Snapchat as less “indispensable” than in March, yet also noted a lower propensity to stop using the platform (Figure 6). Despite solid overall engagement, users showed tepid usage of Snap’s new innovations (e.g,. Maps, Bitmoji, Search) Users cooled on the quality of Discover content from our March survey. On advertising, the majority of respondents have noticed no change in ad quality since June (Figure 25), though perceived conversion rates seem to have fallen Overall, our survey paints a generally positive picture for Snap heading into 4Q, with solid core engagement offset by continued shortfalls in advertising. Our conversations in the ad community around Snap remain decidedly mixed.
Walmsley also got some interesting responses when asking those who don’t user Snapchat on a daily basis why they don’t. He describes the write-in responses:
- “I only use it when i have time to respond to my snaps”
- “I work”
- “My life is boring and it wouldn’t amuse anyone”
- “Not a selfie person”
- “Busy mom”
- “Just like using it when they add new faces for pictures”
- “It starts drama with my boyfriend getting jealous”
- “I tend to forget I have it”
- “I just don’t have the time I wish I had for all social media”
After reviewing all the data, Walmsley concludes, “We await more concrete signs of an ad spending ramp before becoming more constructive on SNAP shares,”