Snap report shows slow growth
OH, SNAP. The parent company of Snapchat released its first earnings report as a public company, and exposed some problems that – unlike pictures on its service – aren’t going to disappear quickly. Snap saw its shares fall dramatically in afterhours trading, after reporting slower than expected growth. The company’s results raised questions about its ability to compete with social media behemoth Facebook, which has altered some of its products to mimic Snapchat features.
Investors sent the stock down 25 percent to $17.22 per share, after Snap reported a $2.2 billion loss; much of that comes from $2 billion in charges related to the company’s initial public offering. S&P Global Market Intelligence said last month that polled analysts don’t expect Snap to make a profit until at least 2019.
The company raked in $149.6 million in revenue, falling short of analyst expectations of $158 million. The firm also reported a loss of $2.31 per share, compared to the 20 cents per share analysts polled by S&P Global Market Intelligence estimated.
However, the alarm bells were really sounding over user growth, which analysts had warned was the most important aspect to watch – particu- larly after Facebook reported a blockbuster quarter.
Snap now has 166 million users – a 36 percent increase from the same time last year. Analysts had been looking for faster growth of at least 40 percent, as an indication that Snapchat can retain its unique, young base of users.
Chief Executive Evan Spiegel downplayed growth concerns, saying that Snapchat isn’t interested in strategies – such as pestering users with notifications – that could pump up the number of people who use its app daily.
“We don’t think that those sorts of techniques are very sustainable over the long term. And I think they can ultimately hurt our relationship with the customer,” he said.
The young social network garnered a lot of attention when it went public in March, debuting at $17 per share. Since then, Snap has worked to court advertisers and media companies looking to tap into the firm’s younger audience, who have been drawn to the company’s wacky filters, ephemeral messages and short-form content.
It has also aggressively updated its app. For example, it added a slew of augmented reality features earlier this month, and announced on Tuesday that it would allow users to replay messages indefinitely.
Those additions come as Snapchat tries to stay a step ahead of Facebook, Twitter and other social networks that have looked to Snapchat for clues on how to draw a younger audience – the majority of Snapchat’s users are under 35. Facebook introduced a feature very similar to Snapchat’s “Stories” for its main network and the photo-sharing platform Instagram, which analysts worried would eat away at Snapchat’s already slowing growth rate.
“The bottom line is, if you want to be a creative company, you have to . . . enjoy the fact that people are going to copy your product if you make great stuff,” Spiegel said.
It’s not clear how much these competing products have hurt Snapchat. Mobile analytics firm App Annie said in a blog post last week that Snapchat has very loyal users. The firm found that 35 percent of Snapchat users do not use Facebook on a daily basis. When looking at Instagram, that number went up to 46 percent.
Snapchat should continue to play to its strengths and focus on the audience that seems to love the platform just the way it is, analysts said.
“I could easily see Snapchat get distracted by trying to be the end-all-be-all for users, as they receive continued growth pressures from Wall Street,” said Jessica Liu, a marketing analyst for Forrester, in an email.
Spiegel and other executives offered few details on other parts of Snap’s business, though Spiegel said that the firm’s Snapchat Spectacles – the company’s sunglasses with an embedded camera – generated around $8 million in revenue this quarter.