Markets

A Foolish Take: Snapchat Will Keep Growing in Instagram's Shadow

Snap's (NYSE: SNAP) Snapchat faltered last year as its growth in daily active users (DAUs) flattened out. It struggled with competition from Facebook's Instagram, which cloned popular Snapchat features like vanishing messages and filters, and a poorly received app redesign alienated some longtime users.

Yet Snapchat started growing its DAUs again over the past three quarters, thanks to a rebuilt Android app and its resilient growth among U.S. teens. Eighty-one percent of U.S. teens still engage with Snapchat, according to Piper Jaffray, while 85% engage with Instagram.

Snapchat increased its DAUs 13% year over year to 210 million last quarter, and eMarketer estimates that its monthly active users (MAUs) could rise from 293 million this year to 356.3 million by 2023. The firm expects much of that growth to come from new and returning teen users, as well as its growing presence among older users.

Chart showing estimated number of Snapchat users each year from 2019 to 2023

Source: eMarketer. Chart by author.

Snap is still unprofitable and won't catch up to Instagram, which serves over a billion MAUs, anytime soon. However, Snapchat continues to gain new users and lock them in with an expanding ecosystem of games, filters, and original videos, so it should remain a top advertising platform for Gen Z-oriented companies.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Facebook and Snap Inc. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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