Snap reveals operating risks and maintaining user growth as the biggest concern

the Wall Street Journal recently wrote that in the prospectus submitted by Snap, the developer of instant Snapchat, the company pointed out that although the user base continues to grow, the growth rate is likely to decline over time.

the Wall Street Journal wrote a few days ago that in the prospectus submitted by Snap, the developer of instant Snapchat, the company pointed out that although the user base continues to grow, the growth rate may gradually decline over time. Maintaining user growth is one of the company's biggest risks, highlighting the challenges the company faces in competing with large social networks such as Facebook. The following is a summary of the article:

Snap disclosed in its prospectus filed with the Securities and Exchange Commission (SEC) on Thursday that maintaining user growth is one of the biggest risks facing the company's business, highlighting the challenges the company faces in competing with large social networks such as Facebook.

Snapchat's parent company says, "our ecosystem of users, advertisers and partners depends on the participation of our user base. We expect that the growth rate of our user base will decline over time. If we fail to retain existing users or attract new users, or if our users are less interactive with Snapchat, our business will be seriously hurt. "

Snap says the company's user base is still growing, but warns that growth will slow over time. Snap revealed in its prospectus that the average number of daily active users reached 158 million in the fourth quarter of last year, an increase of 48 per cent over the same period last year. The company also said that the number of Snapchat users reached 100m in 2015, double that of a year ago.

when social networking site Facebook and microblog Twitter filed prospectuses a few years ago, both companies pointed out that their businesses might be affected by a lack of growth in the number of users. For Facebook, this effect hasn't really happened yet. Compared with 900m users at the time of the initial public offering in 2012, Facebook now has more than double the number of users, and the company's share price has risen sharply. The company's results for the fourth quarter of 2016, released this week, showed that its average number of monthly active users was 1.86 billion as of December 31, up 17% from a year earlier.

but this risk has been reflected in Twitter. Since landing on the New York Stock Exchange three years ago, Twitter has added only 100m monthly active users, and the company's share price has fallen sharply.

Snapchat faces particular challenges in expanding the number of users: the app attracts advertisers because the mainstream users are teenagers and millennials, who are also the earliest users of social networks. Advertisers have been trying to reach this young group of users. For this reason, if Snap tries to expand its audience to other age groups, it could threaten the company's attractiveness to advertisers.

Snap also warned that the company may face difficulties in attracting users over the age of 18 to 34. Compared with young users, middle-aged and older users visit Snapchat for a shorter time and less frequently. Focusing on young users may make Snapchat face challenges in expanding its user base, but it will also protect Snapchat's appeal to advertisers whose products are targeted at teenagers and millennials.

Snap also needs to handle its relationship with advertisers carefully. "almost all of our revenue comes from advertising," the company said in its prospectus. Failure to attract new advertisers, losses or reduced expenses of advertisers may seriously damage our business. " Snap said advertisers may think that some of the Snap products are experimental and unproven, and that they will stop doing business with Snap if they no longer believe that advertising on Snap will generate competitive returns.

one of the main complaints of advertisers for a long time is the lack of data related to the effectiveness of Snapchat ads. According to sources familiar with Snap ad buyers, some advertisers have begun to doubt the effectiveness of ads on Snapchat. To fix the problem, Snap has teamed up with Nielsen to provide advertisers with third-party data that measures advertising activity.

the biggest competitive threat to Snap at the moment is Facebook, which hopes to snatch young users from Snapchat. Since the end of 2016, Facebook has implanted many functions that mimic Snapchat in its photo-sharing app Instagram, including live video streaming, pictures and video burning after viewing. All these pose a threat to Snapchat adding new users. "our competitors may get users at the expense of our user growth or participation, which could seriously damage our business," Snap said.

Snap also warned, "if we encounter network security problems, or if our platform is attacked, it will affect the ability of users to access our products and services, and our users, advertisers and partners may reduce or stop using our products and services, which will seriously damage our business." Hacking can be a huge trauma for Snap, as users of the instant messaging app Snapchat may send more private content than other instant messaging apps.

after Trump is elected president of the United States, Snap also believes that this will be one of the risks that the company may face. In a prospectus filed on Thursday, Snap said changes to current "open Internet regulations" could have an impact on the company's business. The warning was not mentioned in a confidential prospectus filed by Snap on October 31 last year. Snap now believes that if regulators or courts make changes to the "legislation in the network", mobile operators may restrict users from using products such as Snap's Snapchat.

Edit: nancy