Growth at Snapchat Stalls in First Quarterly Report

On Wednesday, Snapchat parent company Snap, Inc. posted a huge loss along with a slowdown in its user growth, while its revenue came up short of expectations of Wall Street in its first report for earnings as a public entity.

Just last week, Facebook posted revenue growth in the double digits for its first quarter, which it has done consistently since 2012 when it had its initial public offering.

Snapchat posted daily active users of 166 million in the most recently ended quarter, which represented a 36% increase from the same period one year earlier. In its first report following its IPO in 2012, Facebook disappointed its investors with grow in users of just 32%.

However by that time, Facebook’s users were already 552 million or over three times the number of Snapchat.

Close to $2 billion of the loss of $2.2 billion for Snapchat during the three-month period just concluded, involved the costs of stock compensation related to the initial offering by the company. Facebook was similar in 2012, with costs of $1.3 billion.

However, revenue for Facebook during its first quarter following its IPO in 2012 was $1.18 billion.

Although revenue for Snap was close to quadrupled during the quarter, it rose to only $150 million and was short of what analysts on Wall Street estimated of $158 million.
Snap stock was down 24% on the news during afterhours trading.

Growth in user base at Snapchat started slowing in 2016 after Instagram, now owned by Facebook, copied the “stories” feature of Snapchat, which allows users to post videos that will disappear in 24 hours.

Facebook, in order to not miss the trend, launched their own disappearing stories in 2017. Facebook, which also owns WhatsApp, the messaging service, came out with status on the messaging service that allows its users to post videos and photos that will disappear in 24 hours.

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.

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David Glass

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