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

Snap Inc., the company behind Snapchat, meanwhile, is intent on forging ahead against its much bigger rival, courting older users, keeping young ones and along with them, advertisers.

The social media app and "camera company" behind Snapchat is a cryptic one.

Snap also recently announced a new self-service advertising platform for brands in an effort to grow its ad sales business and begin making more money from the users it already has.

Uh-oh. Wall Street was not impressed with Snap's first earnings report.

But investors have anxious that Snapchat's growth will stall as Facebook relentlessly targets the service's audience. Once $29.44 per share, Wednesday's earnings report sent shares dropping to $17.27, just.27 more than its initial offering price of $17, and down $1.26 per share from the $18.90/share the stock was at going into Wednesday. During Q1 2016, Snap registered $0.32 per user, while Wednesday's report placed ARPU at $0.90.

Suranga Chandratillake, general partner of Balderton Capital, said: "Even though Snap missed on its first call, I think it's too early to give the doom merchants centre stage". Snapchat's daily active users grew to 166 million for the quarter.

Snap also reported that its users spend 30 minutes a day on average using the app and create 3 billion Snaps each day.

Snapchat's user growth slowed to a halt in the final three months of 2016, which coincided with Instagram launching its Snapchat copycat feature.

Snap could derive solace that it could beat the competition to reach whatever growth it could unlike Facebook or Twitter that did not have the kind of competition that Snap has now. 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. "Just because Yahoo has a search box, doesn't mean they're Google", Spiegel added. The move could potentially make the service more intuitive to new users. It's essentially not a social networking application like Facebook or WhatsApp. TechCrunch says that this is the lowest since the time Snapchat went public.

All that copying appears to be paying off for Facebook - and potentially hurting Snapchat.

  • Zachary Reyes