Snap Plunges on First Earnings Report as Public Company

  • Snap Plunges on First Earnings Report as Public Company

Snap Plunges on First Earnings Report as Public Company

Snap saw its shares fall dramatically in after-hours trading, after reporting slower than expected growth.

A survey of more than 3,000 people in the U.S. revealed consumer confidence in SnapChat was quite low, with 62 percent claiming they expect a SnapChat alternative to be released to which they will switch.

But it's not going so well.

On Wednesday, the parent of the messaging app Snapchat reported earnings that missed Wall Street expectations in nearly every regard.

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.

Daily users increased to 166 million, compared with 122 million from the same period last year, a 36 percent jump and its slowest year-over-year growth rate in at least two years, according to The Wall Street Journal.

Snap also reported net losses of $2.2 billion for the quarter, with $2 billion of that coming from stock-based compensation after the company's IPO. Indeed, the Stories feature on Instagram, which is owned by Facebook, has some 200 million daily users.

If that same price drop is sustained in regular trading Thursday, it will cost Spiegel more than $1.3 billion in the space of less than 24 hours.

Snap reported US$150 million in total revenue in the quarter, up 286% from US$39 million a year ago.

Snap posted sales of $149.6 million for the March quarter, far below Wall Street estimates. And that still undershot the $158 million analysts polled by FactSet had expected.

Facebook also allows users to tweak photos on their smartphones with visual details like a rainbow or a beard of glitter, also similar to Snapchat. See a trend here?

A CEO of a social media marketing business believes that Snapchat got ahead of itself with pushing new features, when what it has done best is messaging one-on-one.

"The connectivity issue is a real problem in the developing world-it changes the use case of how people use Snapchat", said Spiegel.

"We still have a lot of work to do, and are excited about the potential from continued performance improvements".

Evan Spiegel and Bobby Murphy, founders of Snapchat.

Facebook has introduced various clones of Snapchat stories and seems like it is taking a toll on both, Snapchat earnings and Snapchat users.

Until one investor straight up asked: "Does Facebook scare you?"

Snap's weak user growth is even more of a concern. Facebook as a whole dwarfs Snapchat eight times over with 1.8 million users. It is Snapchat which has popularised animated AR selfie masks and facial filters.

The company contends it can generate healthy and sustainable revenue with advertising aimed at its users, the bulk of whom are in a coveted demographic of people 18 to 34 years old. At one point, the stock was down 25% and as of this writing, the stock is down 19.4%. So, the choice is to keep up with the younger generations and "their evolving behaviors and attitudes", or grow up with its original audience as it ages, said Jessica Liu, an analyst at Forrester Research.