We can see what it looks like when Facebook and Snapchat stop growing

  • Facebook and Snap have seen user growth rates in the US stall in recent years.
  • Analysts say that Snap has hit a ceiling – it now reaches 90% of all 13-24 year-olds in the US.
  • Facebook’s daily and month active user growth rates have stalled in its most important markets – Europe, US, and Canada.
  • It’s a glimpse into what it looks like when Facebook and Snapchat stop growing.
  • Visit Business Insider’s homepage for more stories.

On the surface, Snap and Facebook’s earnings this week were a big success.

The two beat out Wall Street’s estimates for revenue and earnings, sending their stock prices soaring. But a closer examination of their user numbers suggests trouble for Wall Street’s favourite tech metric: growth.

Snap’s stock rally post-earnings on Tuesday was short-lived. Analysts quickly pointed to the company’s global daily active user numbers, which fell by 1% in the North American market in the first quarter of 2019 versus that time the year before; user growth also stalled overall.

Read more:
Snap beat Wall Street’s expectations for Q1 2019, but its user growth is still stalled

Analysts say this is because the company has hit a ceiling in this market.

“They are at a point in North America of reaching the majority of all the users they are going to reach,” Ron Josey, an analyst at JMP Securities, told Business Insider.

Snap outlined in its earnings that, as of March, Snapchat had reached 90% of all 13-24 year-olds, and 75% of all 13-34 year-olds, in the US.

“We have achieved significant reach with Millennials and Gen Z in key markets like the United States,” CEO Evan Spiegel said in a call with investors on Tuesday. “As of March, our ads can now reach more 13-34 year-olds than Instagram in the United States.”

It was a similar story at Facebook, which reported earnings on Wednesday. While the company has miraculously managed to withstand a year of privacy scandals, its user growth in the US seems to be waning.

Charts shared in its earnings results show how daily active users in the US and Canada flatlined for the past two years; monthly active user data followed a similar pattern in 2018.

FacebookFacebookUser growth in the US has flatlined at Facebook for the past two years.

Most of the growth during the quarter was reserved to countries outside of the US, Canada, and Europe, where Facebook is working hard to reach new audiences. To do so, it has invested in apps which are targeted to these places – Facebook Lite, for example.

Facebook CFO Dave Wehner hinted on a call with investors on Wednesday that revenue growth in the US could also be impacted thanks to increased regulation and “ad targeting related headwinds.”

The headwinds he refers to are related to new privacy features including a ban on advertisers targeting users based on race, age, gender or zip code, and the introduction of privacy-focused legislation in Europe and possibly California.

A stall in user growth isn’t all bad news. Facebook, at least, will remain a money-making titan for the immediate future. But stalling US growth shows how both Snap and Facebook will need to shift their priorities away from a growth-at-all-costs mentality to making their services appealing enough for people to stick around.

Shona Ghosh contributed to this reporting.

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