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Snapchat shares plummet as Snap Inc's first results are out

Evan Spiegel Snap shares plunge 20pc as quarterly revenue misses estimates
Manuel Armenta | 19 May, 2017, 23:15

Shares of Snap, creator of the popular app Snapchat, plummeted more in after-hours trading Wednesday following a disappointing quarterly earnings report.

In the three months that ended March, Snap reported first quarter revenue of $149.648 million, which marked a rise of 286% year over year, compared to last year's mark of $38.798 million. Net losses totaled $2.2 billion.

The fact that Facebook, which is ten times larger than Snap, is growing at a faster pace can't sit well with the Street. Snap had 166 million daily active users in the March quarter, an addition of just 8 million from the previous quarter. CEO Evan Spiegel received a $750 million bonus for the IPO.

Snap is going to need to maintain high user growth rates, and it plans to grow DAUs by lowering the barrier to entry for creation through new features, such as augmented reality lenses.

Beating so easily early on didn't help Twitter much in the long run, as its user growth problems, which were already apparent in that first report, spiraled out of control and hurt the company in the long run, eventually costing CEO Dick Costolo his job.

According to Reuters, the $27.98 billion company's weak user growth could be attributed to intensified competition from Facebook Inc (FB), which increasingly copies SNAP's formats across all its platforms.

Prior to Spiegel's comments, the clearest rebuke of Facebook from a Snapchat insider came from Spiegel's fiancée: supermodel Miranda Kerr.

"Just because Yahoo has a search box doesn't mean they're Google." he added. And in the blink of an eye, the billionaire co-founder of Snap (snap) had lost hundreds of millions of dollars.

Snap is also pushing toward direct-response dollars with features that let users watch content or buy items. 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.

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.