Snapchat overhaul convinces its investors it can fight Instagram

Snapchat owner Snap Inc. on Tuesday reported surging growth in users and revenue in its latest quarter, reviving hopes that it can survive competition with Facebook Inc’s Instagram and sending its shares up more than 20%.

Investor enthusiasm for the instant messaging application company faded after its initial public offering last year.

But the Venice, Californiabased firm said that customers were now staying longer on the Android version of its app, after software bugs were fixed, and advertisers were taking to an auction-based advertising system that made it cheaper and easier to buy ads.

Snapchat’s daily active users rose to 187 million in the quarter that ended December 31 from 178 million in the third quarter, beating analysts’ average expectation of 184.2 million users, according to financial data and analytics firm FactSet.

Daily active users rose 18% from a year earlier, reversing a trend of slowing growth. The figure is closely watched by investors who hope user growth can be translated into advertising revenue. Revenue rose 72% to $285.7 million, beating analysts’ expectations of $253.2 million as companies advertised more in the key holiday quarter.

Instagram, with more than twice the daily users of Snapchat and backed by Facebook’s large bank account, has threatened to stamp out its rival by copying features such as photo filters and disappearing slide shows.

Confidence that the two could coexist in the social media sector was shaken when Snapchat’s user growth stalled last year. Analysts, though, said that Snapchat appeared willing to look inward and try to fix problems rather than be distracted by Instagram.

“They are going to continue to be competitors, and Snap is doing a creditable job of competing for revenue,” analyst Michael Pachter of Wedbush Securities said.

Snapchat is courting advertisers in an internet ad market dominated by Facebook and Alphabet Inc.’s Google, which together control half the market share, according to research firm eMarketer.

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