Snapchat's Download Ranking Declines while Instagram's Rises Globally

We've written several times about Snapchat. All in all, we thought Instagram's introduction of Instagram Stories meant the end of Snapchat's growth, and that its $25bn valuation is not sustainable without no growth prospects internationally. Today, we want to show you some evidence of Snapchat beginning to lose ground in face of competition Facebook's Instagram. It seems that the downward trend began in the US, and is beginning to spread over to other countries where Snapchat has been quite popular. People thought Snapchat was a platform. However, if this trend continues for the near future, it mean that Snapchat was merely a feature that could be easily integrated & cannibalised by a bigger platform.

Exploring Apple App Store Download Ranking Trends

2016 was the year of Snapchat. It held the #1 position as the most downloaded Photo & Video mobile app in the US, and grew its user base from 110mn Daily Activer users in 2015 to 150mn by June of 2016. In fact, Snapchat was so dominant that it lost the #1 spot on the Apple App Store only 9% of the days (i.e. 16 times) between February and July of 2016. As you can see in the below chart, that all changed in August when Instagram introduced its Snapchat-like feature "Stories."

Snapchat Apple App Store Download Ranking - US

The correlation between Instagram's rise in rankings and Snapchat's decline is crystal clear, and has been becoming more clear recently. While Instagram has been #1 Photo and Video app in the US only 3 times from February to July of 2016, when Snapchat was going through a rapid growth in its user base. Lately, this situation has turned on its head. Instagram has been gradually replacing Snapchat as the top photo & video app on the app store more frequently since December, and now its monthly average rank has matched Snapchat so far in February, which never happened in 2016. To put it another way, Instagram has gone from beating Snapchat in ranking only 10% of the time in 2016 to beating Snapchat 36% of the time in February 2017.

Average Download Ranking in the US: Snapchat vs Instagram

SnapchatInstagram
20161.472.48
Nov1.732.60
Dec1.292.58
Jan1.392.00
Feb MTD1.691.69

This is significant because the app store ranking takes into accounts a variety factors including downloads, updates, engagement and uninstalls. From Snap's S-1 IPO filing, we can already tell that its user growth has decelerated significantly since Q3 of 2016, right after Instagram introduced its Snapchat-like function. Given that the US is a relatively saturated market, the fact that Instagram, which has a even more saturated user base than Snapchat, is starting to overtake Snapchat's ranking suggests that users are leaving Snapchat in favor of Instagram Stories. The fact that this trend is accelerating towards the end of 2016 suggests that Instagram's introduction of features like emojis and stickers have helped lure users and their time away from Snapchat. That Instagram is winning even more often in January and February than it did in Q4 of 2016 is a worrying sign for Snapchat: if it was growing users by 3% Q/Q in Q4 when its ranking was way better, it could very well be losing users in Q1.

Snapchat's Global Daily User

Trend Is Spreading Internationally

Instagram isn't just winning in the US. The overall trend that we mentioned is happening in other developed markets where Snapchat has been popular. Below is a table that showcases each app's average download ranking on a monthly basis. As you can see, in markets like Canada, UK, Mexico and Australia, Instagram had been consistently below Snapchat in terms of the app store ranking for most of 2016. However, towards the end of 2016, we began to see Instagram suddenly ranking higher than Snapchat. It's not even worth mentioning other markets like Asia because Instagram and Snow have been dominating the photo-social markets in those regions.

Average Download Ranking for Snapchat

SnapchatUSCanadaUKAustraliaMexicoBrazilItaly
2016 1.47 1.47 1.40 1.65 2.03 2.34 2.35
Nov 1.73 1.77 1.23 1.70 2.93 3.10 3.00
Dec 1.29 1.29 1.03 1.29 2.68 3.00 2.94
Jan 1.39 1.61 1.90 1.55 2.94 3.13 3.00
Feb 1.69 2.00 1.69 1.93 3.00 3.00 3.23

Average Download Ranking for Instagram

InstagramUSCanadaUKAustraliaMexicoBrazilItaly
2016 2.48 2.42 2.40 2.39 2.80 1.99 2.19
Nov 2.60 2.27 2.57 1.57 2.37 1.23 1.67
Dec 2.58 2.19 2.68 1.71 2.29 1.19 1.39
Jan 2.00 1.48 2.19 1.45 2.00 1.16 1.32
Feb 1.69 1.38 1.38 1.07 2.00 1.15 1.00

$25bn Valuation & IPO

Snapchat's valuation has more than doubled from $10bn in 2014 to $25bn in 2016. Now, Snap is in the process of preparing for an initial public offering at an undetermined valuation. What's for sure is that growth is an essential component needed to sustain or even increase such a valuation for a company that's expected to make about only $1bn in revenue in 2017. However, download ranking data is suggesting that user growth is non-existent, and that's a terribly worrying sign for the company.

On the other hand, this is a great sign for Facebook. For a long time, investors have been concerned about the rising popularity of Snapchat, that Snapchat could eventually overtake Facebook as the new cool app for teenagers. However, our finding suggests that what Snapchat stood for, i.e. ephemeral photo & video sharing, might have been more of a feature than a platform. As soon as Facebook introduced Instagram Stories, they've been successful in attracting users & thwarting Snapchat's advance on its territory. Investors in Facebook should be very happy with this development.

On the other hand, there are striking parallels between Twitter and Snapchat. Twitter was the best source of getting live news from all over the world; however, as Facebook integrated a similar feature onto its platform, Twitter's user growth faltered. Twitter also IPO'ed around the same valuation that Snapchat currently has, with a similar level of revenue as well. Twitter's user base has stalled around 300mn monthly active users for quite some time, and Snapchat's user base has not grown all that much since June of 2016. Meanwhile, Instagram's user growth has accelerated, adding 100mn users in 6 months to 600mn monthly active users by Dec 2016; previously, it took them 9 months to add 100mn users to the platform.

If you are an investor who is looking forward to the highly anticipated IPO of Snapchat, we hope you take a deep look into this issue and make a careful decision.

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