Snapchat's growth stalls in Facebook's shadow in 1Q report

15 May, 2017, 02:27 | Author: Glen Fletcher
  • Evan Spiegel Bobby Murphy

The company's shares fell almost 25% to $17.39 in the wake of the first quarterly earnings report since Snap's highly-publicized initial public offering in March, according to Reuters. Snap took a loss of $2.2 billion for the quarter, or adjusted losses of 20 cents per share, but the company said approximately $2 billion of that was due to stock-based compensation costs related to the company's March IPO.

Shares of Snap (NYSE:SNAP) traded down 21.45% during midday trading on Thursday, hitting $18.05.

The number investors were perhaps most concentrated on in Snap's first earnings report as a public company was user growth, which slowed significantly between the fourth quarter and the first. Facebook introduced a feature very similar to Snapchat's "Stories" for its main network and the photo-sharing platform Instagram, which analysts anxious would eat away at Snapchat's already slowing growth rate. But by then, Facebook had 552 million, more than three times Snapchat's.

Spiegel had a biting response to Facebook's copycat tactics: "Just because Yahoo has a search box doesn't make it Google". The company has sharply divided the bulls and the bears, with bulls pointing to the company's popularity among teens and scalability, while bears have pointed to the the company's lack of profits, and weak growth in its user base. That was down from 53 percent growth in users in the first quarter of 2016, continuing a slowdown in new users that Snap first disclosed in its public offering filings this year. Despite this, only 5m Snaps have been created through the wearables to date, compared to the 3bn sent daily over the application as a whole.

He emphasized that users were still highly engaged with Snap. Snap had 166 million daily active users in the March quarter, an addition of just 8 million from the previous quarter.

Facebook, which once made a $3 billion bid for Snapchat, has upped the ante by making the camera a central piece of its apps and offering features similar to Snap on its platforms, including Instagram and WhatsApp.

Snapchat has tried to become more like its bigger rival - at least when it comes to success - by courting new users and with them, advertisers.

"Much of the call should be around Stories as it represents the bulk of Snap's future value given the importance of video advertising to the company's relatively nascent business model", Goodwater's Kim said.

Shares of the parent company of Snapchat were down on Thursday following the earnings report.

"If you want to be a creative company, you've got to get comfortable with and enjoy the fact that people are going to copy your product if you make great stuff", said Snap Chief Executive Evan Spiegel.

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