Snapchat has admitted that it is facing intense competition from Instagram and that this is one of the factors that have caused a sudden slowdown in its rate of market growth.
In its regulatory filing for an IPO, the company has said that it is generally facing intense competition in the market for all its businesses but singled out Instagram, the Facebook-owned app, as the main rival to its business.
‘We are facing intense completion in all the areas of our business in general and regarding our Snapchat stories business in particular, ‘the company said.
The company further added that the level of competition increased dramatically after Instagram launched ‘Instagram Stories’ which is a replica of Snapchat.
Observers are still divided on the actual contribution that the launch of Instagram Stories has had on cutting down the growth prospects of Snapchat over the past few months.
On one hand, it has been reported that other competitors, most notably Snow, may have contributed to the decline of the growth prospects of Snapchat for the last 3 quarters.
On the other hand, the statistics that have been released indicate that Snapchat started taking a beating immediately after Instagram Stories was launched.
Snapchat is reported to have experienced phenomenal growth during the first two quarters of the financial year. For the first quarter, the company grew at a rate of 14%, averaging 122 million users on a daily basis. It is further reported that the sharp rate of growth of the company increased during the second quarter, thanks to a growing demand for visual communication services on full screens and lack of a strong competitor in the market.
Reports indicate that the rate of growth of the company during the second quarter of the just-ended financial year reached 17.2%, with the average number of daily users reaching 143 million.
It is further reported that the moment Instagram launched Instagram Stories, the growth rate of Snapchat started declining tremendously.
Instagram Stories was launched back in August. It appears that Instagram Stories capitalised on its numbers, having about 300 million daily users of the Instagram app, to directly take on Snapchat.
For the last two quarters of the just-ended financial year, the rate of growth of Snapchat declined drastically, with the company growing at a meagre 7% in the third quarter and 3.2% in the last quarter.
However, the company has also pointed out other factors as having contributed to its slow rate of growth in the last two quarters of the financial year.
‘Hitches in rolling out our apps as well as a lack of clear progress in new markets are some of the challenges that we faced,’ the company said.
It remains to be seen how Snapchat will perform in the next financial year, given the level of competition that it is now facing from the likes of Instagram and Snow.