Snapchat blames its slower user growth on 'technical issues' in its product updates
New products and features are intended to boost growth. But in Snapchat's case, the company claims its new products have had the opposite effect.
The company says the slowdown in user growth it suffered in the second half of 2016 is because of bad product updates - and not necessarily an increase in competition.
During the second half of 2016, Snapchat's growth took a hit. It added only six million new daily active users between July and September. The three months prior, Snapchat had added triple that, or 18 million users. That was a number on par with the first quarter of 2016 when the app added 20 million users.
In its S-1 filing, Snap ascribed the problem to unspecified hiccups in new product launches:
"For example, in mid-2016, we launched several products and released multiple updates, which resulted in a number of technical issues that diminished the performance of our application," the company said in its risk factor section. "We believe these performance issues resulted in a reduction in growth of Daily Active Users in the latter part of the quarter ended September 30, 2016."
Snapchat didn't go into detail about exactly what the "technical issues" were, though it did not that the impact was more pronounced with users of Android devices.
Interesting timing
One of the biggest updates of the summer was Memories, its go-to place for users to save their Snaps. It was the first time the company made something "permanent" and lasting within the app. Snapchat also added Bitmoji integrations to the app - but neither seemed to boost Snapchat's numbers.
While the company may blame it on its own product updates, the timing of its growth slow down does match with when Instagram launched its Snapchat competitor: Stories.
On August 2, Instagram created a near-clone of Snapchat's stories feature, which let users post images that disappear in less than 24 hours. According to TechCrunch, Snapchat influencers have already seen a drop-off in views on Snapchat as people start paying attention to Instagram's version.
Snapchat didn't address Instagram by name, but it did list "users increasingly engage with competing products instead of ours" and "our competitors may mimic our products and therefore harm our user engagement and growth" as two reasons why its growth in general could be negatively affected.
While Snapchat's slowdown did happen right as Instagram launched its own competitor, it's sticking by the "technical issues" excuse. Now investors will have to wait to see if this quarter's product updates - including Search to find people easier - bring people back to the app or if they've fled to Instagram for good.