It looks like it’s probably not a great time for Snap Inc.
With Snapchat’s growth already flat in key markets, and the platform about to lose another half a million users next week due to Australia’s ban on social media for under 16s, the platform now is banned in Russiadue to its reported use by organized terrorist groups.
Snapchat has been shut down in Russia, along with Apple’s FaceTime, after an investigation found they facilitated suspicious activity.
As reported by Bloomberg:
“[Russia’s] communications agency Roskomnadzor said that Snapchat and FaceTime are used within Russia “to organize and carry out terrorist acts” and recruit perpetrators, as well as to commit fraud and other crimes.”
That’s not a huge surprise, although one would assume such groups would instead turn to encrypted messaging apps like WhatsApp.
But Russia also limited itself WhatsApp and Telegram in Augustwhich is apparently part of the Russian government’s broader attempt to push citizens to instead use the state-controlled messaging app MAX, which was developed by the Kremlin and is strongly promoted in the region.
It appears Snapchat and FaceTime are the latest victims in Russia’s attempts to gain more control over citizens’ activities. Which Snap may have seen coming, as Russian authorities have moved to force phone companies to pre-install MAX on their devices.
But still, it’s another blow to Snap, which counts 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 advertising business. Snapchat has worked to maximize the opportunities available, working to capture more SMB ad spend, and has managed to improve its business performance.
But a decline in usage now seems all but inevitable for the fourth quarter, although some of these losses will be offset by continued growth in developing regions.
The problem with these markets is that Snap doesn’t generate as much revenue from Indian and Southeast Asian users, so the bottom line impact doesn’t correlate. So even if Snap can achieve flat growth, losing some of its Australian audience, and Russia as a whole, will impact its business potential.
But instead of focusing on the negative, Snap is looking at its AR progress as it expects to launch its AR-enabled glasses sometime next year. My opinion is that this will not be a successful product, and could in fact mark the beginning of the end for this current iteration of Snap, with the company set to lose millions developing AR glasses that will be replaced almost immediately 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 been a hit for the company.
Snap’s Spectacles, meanwhile, launched to much fanfare but eventually fizzled out costs the company millions due to low sales and consumer interest.
The AR specs will follow the same path, and with user growth slowing, it looks like things are only going to get more challenging for the app.
And it’s already added ads to people’s inboxes. Where else will it promote promotions to increase revenue potential?
The broader story here, of course, is Russia’s push for 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 blow that will hurt the company’s growth plans.
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