Snapchat's growth stalls in Facebook's shadow; stock plunges

Snapchat's growth stalls in Facebook's shadow; stock plunges

To say that Wall Street was disappointed in the first earnings report of Snap Inc., the parent company of the app Snapchat, might be an understatement, as the company reported a $2.2 billion loss and lower than estimated revenue.

Snap reported that its net loss increased significantly from $104.5 million to $2.2 billion as the company spent $2 billion on stock-based compensation expense after its IPO. Instagram Stories, a Snapchat-like feature of the social media app that allows users to string together images and video clips, now has 200 million daily users - 34 million more than Snapchat - according to an earnings report released recently by Instagram's owner, Facebook. DAUs increased 5 per cent quarter-over-quarter, from 158 million in Q4 2016. That tactic didn't pay off during the first quarter as Snapchat's average revenue per user fell 14 percent to 90 cents in the first quarter from $1.05 in the fourth quarter - a drop of 17 percent.

Wednesday's results from Snap come just a week after Facebook reported solid first-quarter results, with double-digit revenue growth — as it has consistently since its IPO. The stock has plummeted some 23 percent in after-hours trading, down to $17.64 per share, despite closing at $22.98 today. The company generated most of its revenues from advertising, but brought in $8.3m from elsewhere, largely driven by its Spectacles smartglasses.

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Analysts on average were expecting a full-year loss of $2.86 billion going into the report, according to FactSet, though the average estimate for GAAP losses in Wednesday's report was off by almost $200 million.

Even as he was faced with the challenging prospect of confronting an angry mob of investors and analysts, however, Snap CEO Evan Spiegel still found time to throw shade at Facebook.

Asked if he feared Snap would be crushed by Facebook, Mr Spiegel replied: "You have to get comfortable with the fact that people are going to copy you if you make great stuff".

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Snapchat's first earnings report didn't meet industry expectation.

Snapchat had eight million new users in the past three months but this was much less than analysts expected.

"It's an easy way to grow daily actives quickly but we don't think those techniques are sustainable over the long term and it impacts our relationship with customers", he said. Its nearest competitor Facebook-owned Instagram now has 700 million users, with its "Stories" feature having 200 million daily active users. "Just because Yahoo has a search box doesn't mean they're Google". The company added 3 million users in Europe as well, to arrive at 55 million DAUs.

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