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Can Snapchat Maintain its Lead Over Instagram in the U.S.?

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Per market analytics company Jumpshot, as reported by Recode, Snap Inc’s (SNAP - Free Report) messaging application Snapchat added 52% new users in the United States compared with 48% for Facebook’s Instagram in August. However, the margin seems to be narrowing. On a month-over-month basis, while Instagram registered an improvement in new additions, Snapchat suffered a decline.

The scenario is totally different when it comes to theglobal market. While Snapchat had 38.5% of new signups in August, Instagram registered 61.5%, per Jumpshot.

Growing Popularity of Instagram vs Snapchat’s Efforts

Snapchat offered serious competition to Facebook in terms of attracting teenagers/young adults to its platform. Consequently, Facebook started to mimic Snapchat features on its platforms so as to boost user growth and engagement levels and succeeded in making these more popular than Snapchat.

The slowdown in Snapchat’s user growth is attributed primarily to the popularity of Instagram Stories which is a blatant rip-off of the former’s hallmark feature.

In August last year, Facebook added the “Stories” feature to Instagram. In November 2016, Instagram started allowing users to add links to their Stories.Later, Facebook launched the same on Messenger, WhatsApp as well as on its main platform.

Facebook again copied the features of Snapchat by adding augmented reality filters, hashtag stickers and direct messaging features (enabling users to send text and disappearing photos and videos in the chat section).

Instagram Stories was recently reported to have crossed 250 million users, substantially outperforming Snapchat’s 173 million.

Snap’s primary source of revenues is advertising. A decline in user growth may look unattractive to advertisers and thereby dampen its growth opportunities.

However, Snapchat is aggressively ramping up its original content efforts in a bid to attract new subscribers and survive tough competition from established players like Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) Prime, Hulu and HBO. Facebook, on the other hand, recently announced its plans to spend $1 billion on original content over the next one year.

Per eMarketer’s latest report, this year, Snapchat’s domestic user base is likely to increase 25.8% to 79.2 million driven by a 19.2% increase in users in the 18 to 24 age group. In fact, for the first time, Snapchat is projected to have the highest teen audience (12 to 17 & 18 to 24 cohorts) compared to both Facebook and Instagram, per eMarketer.

For Facebook, eMarketer anticipates a 3.4% decline in its monthly average user base for the important 12 to 17 age group, a sharp deceleration from 1.2% decline witnessed last year. An 8.8% growth in Instagram users in the 12 to 17 age group is projected.

We believe Snapchat needs to focus more on the global market and target other age groups in order to stay ahead in the competition.

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