Snap saw its shares slide despite exceeding expectations on user growth and revenue, while experiencing a lower-than-expected loss, in the third quarter.

Snapchat added 7m daily active users (DAUs) between Q2 2019 and Q3 2019, jumping from 203m to 210m – ahead of the forecasted 207m. The number of users in Q3 2018 was 186m. At the same time, Snap’s revenue grew from $297.7m in Q3 2018 to $446.2m in for the same period in 2019, placing it comfortably above the around $435m expected.

The company achieved a loss per share of $0.04 versus the predicted loss of $0.05. The year-over-year losses fell from $325.1m to $227.4m between Q3 2018 and Q3 2019.

“We delivered strong results this quarter, and we are pleased that the investments we have made are continuing to drive the growth of our community and our business,” said Evan Spiegel, Snap CEO. “We are a high growth business, with strong operating leverage, a clear path to profitability, a distinct vision for the future, and the ability to invest over the long term. We are excited about executing on the many opportunities in front of us.”

Although the third quarter was a positive one, the fourth quarter forecast doesn’t look too great, with the company expecting a revenue of between $540m to $560m versus Wall Street’s predictions of around $555m. This has left Snap shares down around four per cent.

Snap recently announced the introduction of Dynamic Ads, which enable advertisers to automatically create ads in real-time based on product catalogues. The hope would be that this, alongside its commitment to augmented reality, will pay dividends over the next two months to help it to achieve the upper end of its revenue prediction.

Aaron Goldman, 4C Insights CMO, said: “From our point of view, Snap continues to improve its position in the brand playbook. Advertisers using Scope by 4C to manage their Snap Ads in Q3 2019 increased their investments by more than twice what they were spending in Q3 2018. Looking ahead to Q4, there’s a lot for marketers to be excited about on Snap, including the rollout of Dynamic Ads which will take a product catalogue and automatically turn it into personalised creative assets.”

Yuval Ben-Itzhak, CEO of Socialbakers, added: “Snap’s user base may be growing, but it now faces fierce competition not only from Instagram but also from TikTok when it comes to attracting advertisers eager to reach younger audiences. There was a time when Snap was considered indispensable for reaching this younger market. But today, in addition to the ongoing threat from Instagram, many marketers see TikTok as the most relevant platform for reaching teens and young adults.

“Until now, monetisation has been the challenge for TikTok, but the platform has stated that it is exploring opportunities to create value for brands. By the same token, more and more brands are expressing an interest in exploring advertising on TikTok. This means Snap needs to make sure it stays focused on offering real value to both users and advertisers if it is to keep its appeal for brands.

“It will be interesting to see if Snap’s experiments with new formats like Snap Originals and augmented reality ads will be enough to keep TikTok at bay moving into 2020.”