Snap Shares Pop As Kids Ditch Facebook: Here's Why It Matters

Investors jumped on Snap stock on Tuesday after a report suggested that Snapchat’s youthful user base is set to grow more than originally projected. On top of that, CNN debuted a new Snapchat show on Monday.

Shares of Snap SNAP soared on the back of the news and closed up 7%, which marks an extremely strong day for the struggling social media company. But should investors really renew their faith in the disappearing video and photo platform so quickly?

User Report

A new eMarketer report suggests that Snapchat’s overall U.S. user base will jump by 25.8% from last year to reach 79.2 million monthly users in 2017. Snapchat is expected to see increases across all age groups, with the exception of its oldest users. The app’s biggest gains are projected to occur in the 18-to-24-year-old and 12-to-17-year-old categories.

Facebook FB, on the other hand, is set to see a 3.4% drop in monthly average U.S. users ages 12 to 17, which is nearly triple 2016’s 1.2% decline. The report also noted that 18-to-24-year-olds and those younger than 11 will flock to Facebook slower than initially projected.

“We see teens and tweens migrating to Snapchat and Instagram. Both platforms have found success with this demographic since they are more aligned with how they communicate—that is, using visual content,” senior eMarketer analyst Oscar Orozco said. “Outside of those who have already left, teens and tweens remaining on Facebook seem to be less engaged—logging in less frequently and spending less time on the platform.”

Still, Facebook will grow 2.4% overall to reach 172.9 million U.S. users—higher than originally expected due to large gains in the oldest demographics. American Instagram usage is also set to jump higher than initially projected—at 23.8% overall—and hit 85.5 million.

However, eMarketer projects that Snapchat will surpass Instagram and Facebook in the teen (12 to 17) & young adult (18 to 24) demographics in the U.S. for the first time in 2017.

TV News on Snapchat

CNNon Monday launched a new daily news show on Snapchat called the “The Update” that is scheduled to post at 6 p.m. ET every day, along with breaking news updates throughout the day. The cable giant’s new Snapchat news show follows NBC News’ twice-daily Snapchat program called “Stay Tuned,” which debuted in late July. The show has already drawn 29 million unique viewers.

Does it Matter?

Snap investors are likely very excited about the fact that big TV news outlets have started to truly test Snapchat’s viability. But broadcast TV, and live television in general, are currently in a heated battle to maintain their dominance over streaming services as the cord cutting ship races further upstream.

So is Snapchat really an appealing platform for TV news outlets, or is TV news just beginning to test any and all unchartered waters?

The recent eMarketer report suggests that Snapchat’s U.S. user base will increase at higher than expected rates. This is also great news for investors, especially considering that young users are adopting the platform while Facebook is gaining older users.

However, Snap’s stock price has slowly declined since going public earlier this year for an array of reasons, but at the end of the day, only user numbers seem to truly hold weight.

Snap recently officially announced that daily active Snapchat users grew to 173 million, up from 166 million at the end of the first quarter. Yet the company fell short of Wall Street user projections.

Snapchat investors should be happy to read these new user projections and see the likes of CNN on the platform as a positive sign going forward. But at this time, it seems best for investors to remain cautiously optimistic, especially with Mark Zuckerberg looming over almost everything Snap does.

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