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Snap Stock Down Following Negative Growth Forecast

Investors sent share prices for Snapchat maker Snap Inc. down  Wednesday after eMarketer projected that the service will lose monthly U.S. users for the first time in its history this year. Shares closed down 2.75% Wednesday after partially recovering from a more than 5% decline earlier during the day.

This comes a week after Snap announced a range of new initiatives designed to boost reach at its first-ever Partner Summit in Los Angeles. Snap questioned eMarketer’s methodology in response to these projections, to which eMarketer responded Wednesday afternoon with a defense of its approach.

eMarketer projected Wednesday that Snap will have 77.5 million monthly users in the U.S. this year, down 2.8% from last year. The company had previously projected that Snap’s U.S. user base would grow 6.6% this year, reaching a total of 90.4 million monthly users.

The market research company attributed some of the decline to the backlash Snapchat faced over last year’s bungled redesign roll-out, but said that even changes instituted as a result to the backlash weren’t enough to reinvigorate growth. “Snapchat user growth will plateau in 2020,” eMarketer projected. “Between 2019 and 2023, we forecast that Snapchat will only add 600,000 new US users.”

The primary beneficiary of Snapchat’s struggles will be Facebook’s Instagram, which is slated to add nearly 19 million new users in the U.S. by 2023, according to eMarketer.

Snap used its Partner Summit last week to introduce a range of new initiatives designed to boost engagement and reach. This included the introduction of games on Snapchat, new original content and partnerships with other app makers to bring Snapchat Stories to their apps. The company also announced some revenue-focused initiatives, including an ad network that will bring Snapchat’s 6-second video ads to third-party apps and services.

During the event, Snap CEO Evan Spiegel also made a point of comparing Snapchat’s reach to that of other social networks. The company reached 90% of all 13- to 24-year-olds in the U.S., Spiegel said. “In fact, we reach more 13- to 24-year-olds than Facebook or Instagram in the United States, the United Kingdom, France, Canada, and Australia.”

Snap disputed eMarketer’s findings in a statement sent to Variety after the initial publication of this article, with a spokesperson writing:

“The methodology of eMarketer’s recent forecast is flawed. The report does not factor in key recent developments at Snap, such as our revamped Android app, or reference our statement in February that we do not anticipate a sequential decline in our daily active user total in Q1 2019. Its user forecast is more than 10 million off from Snap’s publicly available reach on our ad buying tool, its thesis is narrowly focused on the app redesign from over one year ago, and its methodology draws on self-reported survey data that’s unreliable in our core 13-34 year-old demographic.”

eMarketer responded to this with a statement of its own:

“eMarketer’s forecast is based on an unbaised, multi- pronged approach where we look not only at the Snap ad buying tool, but also combine that with an analysis of numerous third-party survey and traffic data about Snapchat’s usage and other technology adoption metrics, such as internet and social media usage.

While we are aware of key recent developments such as the revamp of the android app, we will wait for more data to determine whether that initiative is successful in bringing users back or attracting new users.

Also, we look at monthly active users rather than daily active users, as we think it is a better measure of engagement longer-term, as DAU inherently suffers from seasonality. Our definition of MAU is also more strict than those of the social platforms themselves, as we count only those who log in consistently at least once a month (every month) during a calendar year, and we weed out fake accounts.”

Update: This post was updated throughout with statements from Snap and eMarketer and Wednesday’s closing price.

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