Seems like it’s probably not a great time for Snap Inc.
With Snapchat’s growth already flat-lining in key markets, and the platform set to lose another half a million users next week due to Australia’s under-16 social media ban, the platform has also now been banned in Russia, due to its reported usage by organized terror groups.
Snapchat has been cut off in Russia, along with Apple’s FaceTime, after an investigation found them to be facilitating suspect activities.
As reported by Bloomberg:
“[Russia’s] communications agency Roskomnadzor said Snapchat and FaceTime were being used within Russia ‘to organize and carry out terrorist acts’ and recruit perpetrators, as well as to commit fraud and other crimes.”
Which is not a huge surprise, though you would assume that such groups would turn to encrypted messaging apps like WhatsApp instead.
But Russia also restricted WhatsApp and Telegram back in August, which is seemingly part of the Russian government’s broader effort to push citizens to use the state-controlled messaging app MAX instead, which was developed by the Kremlin, and is being heavily promoted in the region.
It seems that Snapchat and FaceTime are the latest victims in Russia’s effort to enact more control over citizen activity. Which Snap may well have seen coming, as Russian authorities have moved to force phone companies to pre-install MAX on their devices.
But even so, it’s another blow for Snap, which counts around 8 million users in the region.
The loss of 8.5 million users will put another dent in Snapchat’s growth potential, and limit the value of its ad business. Snapchat has been working to maximize its available opportunities, by working to win over more SMB ad spend, and it has been succeeding in improving its business performance.
But a decline in usage now seems almost inevitable for Q4, though some of these losses will be countered by ongoing growth in developing regions.
The problem with those markets is that Snap doesn’t generate as much revenue from Indian and Southeast Asian users, so the impact on its bottom line doesn’t correlate. So even if Snap can come out at flat growth, the loss of a portion of its Australian audience, and Russia entirely, will impact its business potential.
But rather than focus on the negative, Snap’s looking to its AR advances instead, as it eyes the launch of its AR-enabled Spectacles sometime next year. My view is that this will not be a successful product, and could actually mark the beginning of the end of this current iteration of Snap, with the company set to lose millions in the development of AR glasses that will almost immediately be superseded by Meta’s Orion AR device.
Meta’s version looks better, has better functionality, and will build on the success of Meta’s Ray Ban AI glasses, which have become a hit for the company.
Snap’s Spectacles, meanwhile, launched to much fanfare but ended up costing the company millions due to low sales and consumer interest.
Its AR Specs are set to follow the same path, and with its user growth in decline, it seems like things are only going to get more challenging for the app.
And it’s already added ads into people’s inboxes, where else is it going to push promotions to boost its revenue potential?
The broader story here, of course, is Russia’s push towards a walled garden approach to local connectivity, which will give the Kremlin more control over how people use the internet, and what they see. But for Snapchat, it’s another hit that will hurt the company’s growth plans.
