The company lost DAUs on a quarter-over-quarter basis in both North America and Europe, extending pain points from last quarter, when the European Union’s stricter guidelines regarding user privacy took effect.
Snap also cautioned that global DAUs are likely to decline next quarter as well.
The company took a hit in engagement earlier this year with an unpopular redesign of the app that reorganized friend-generated and publisher-generated content and created a separate Discover tab.
CEO Evan Spiegel has since admitted the redesign was rolled out too quickly, and hinted on the company’s earnings call Thursday there could be further redesigning ahead.
“I think there’s a lot of opportunity to continue improving [the Discover] product,” Spiegel said. “Right now those different types of stories are all blended together in a personalized ‘For You’ feed and I think there are opportunities to improve that layout and potentially separate out that content.”
Snap is making more money per user than Wall Street had predicted, posting average revenue per user of $1.60 compared with consensus estimates of $1.52. Snap grew its average revenue per user from the previous quarter in its two largest geographic areas — North America and Europe — but posted a quarter-over-quarter decline in a catch-all category for the rest of the world.
A higher ARPU suggests the company’s monetization efforts might be paying off.
Snap’s been tweaking and expanding its third-party advertising offerings and ramping up content partnerships in an effort to reach profitability in 2019.
“Advertisers are achieving a high return on advertising spend driving strong revenue growth,” CFO Tim Stone said on the company’s earnings call. “Gross profit and gross margin expanded substantially, which continues to demonstrate that our business model can scale profitably.”
Revenue for the quarter marks a 43 percent year-over-year increase, and revenue for the last 12 months surpassed $1 billion. Snap is projecting fourth quarter revenue between $355 million and $380 million, hovering right around consensus estimates of $370 million, according to Refinitiv.
Snap is still burning cash, though at a slowing rate. The company reported negative free cash flow for the third quarter of $159 million, an improvement from the company’s second quarter negative free cash flow of $234 million.
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