Snap shares plummet as investors worry it's not growing fast enough

Snap Inc. reported its Q1 earnings Wednesday, which showed revenue of just under $150 million from March 2-31.

Snap said its daily active users (DAUs) rose 36.1 percent to 166 million in the first quarter from a year earlier, down from the 47.7 percent rise in users for the fourth quarter and 62.8 percent jump for the third quarter that the company had reported in its IPO filing.

Snap's net losses for the quarter soared from $104.6m (£80.9m) to $2.2bn, largely due to the costs of the IPO. As part of its most recent earnings call, Facebook announced that the Stories clone Instagram Stories has piled up more than 200 million daily active users, a figure that outstrips Snapchat's entire user base.

Average revenue per user (ARPU) was $0.90 in Q1 2017, an increase of 181 per cent over Q1 2016 when ARPU was $0.32. He noted that Snapchat users create 3 billion posts every day and the company is trying to avoid common user growth strategies like a lot of push notifications. That could be a plausible explanation for Snapchat's own slow user growth over the Jan-Mar quarter. In after-hours trading, however, its shares dropped more than 25 percent, reaching a low of $17.18. One of the major challenges in being a publicly traded company is you have to release quarterly earnings reports four times a year - publishing all your numbers to give investors a clear-eyed view of how the business is doing. Last quarter, the company lost $170 million.

On their first day of trading in NY in March, Snap shares closed 44% higher at $24.48, valuing the company at $28bn. "It now faces incrementally fierce competition from deeper-pocketed rivals including Facebook", Instinet LLC analyst Anthony DiClemente said.

Some are beginning to question whether Snapchat can continue to survive Facebook's onslaught.

Snapchat has seen increased competition in the past 12 months, with Facebook and Instagram both adding "Stories" - a feature nearly identical to Snapchat's own of the same name.

Shares in Snap have sunk after it reported slow growth in its first quarter. Not to miss out on the trend, Facebook also launched disappearing stories this year.

At the end of the day, just because Yahoo, for example, has a search box, it doesn't mean they're Google If you want to be a creative company, you gotta get comfortable with, and basically enjoy the fact that people are going to copy your products if you make great stuff.

  • Zachary Reyes