Shares tumbled almost 24 per cent in after-hours trading to $US17.58, wiping some $US5 billion from Snap's market capitalisation in the latest reversal after a red-hot March initial public offering, the biggest for a USA tech firm since Facebook Inc in 2012. With $8 million in revenue, Snapchat likely sold around 60,000 pairs of Spectacles during the quarter. Revenue was also lower than expected with the company bringing in $149.6 million in the quarter instead of the $159 million that analysts expected. Facebook has also added Geostickers to Instagram, offering location-specific tags in two cities (New York City and Jakarta) that users can paste over images. The results sent shares diving after-market Wednesday, and they were opened trading on Thursday down about 20% to $18.43 on Thursday morning.
"When Google came along, everyone really felt like they needed a search strategy", said Evan Spiegel, the CEO of Snap.
"It's just early days for us", he said.
Unfortunately for its shareholders, SNAP stock missed that mark too. The company, founded in 2011, lost more than $500 million previous year on revenue of about $400 million, it disclosed in regulatory filings. The disastrous revenue projections and the dismal growth in the number of users is a reflection of a reality that the company desperately tried to paint with bright colors.
One thing Snap could point to as a moderate success, though, is how Snapchat users appear to be more loyal than most. Such improvements on the Android version of its app helped Snap increase net additional Android users by 30%.
Most of the company's losses went in compensation to Snap's staff after the IPO.
Of note is the fact that Snapchat's core feature - photos and video clips that disappear after 24 hours - has now been copied by both of Facebook's acquired social companies, Instagram and WhatsApp.
And the cycle continues, as Facebook won't be far behind in copying that, too.
Daily active users (DAUs) for the quarter grew 36% year-over-year from 122 million in Q1 2016 to 166 million in Q1 2017. We've seen this happen a lot in technology. And just because Facebook has a product that's similar to Snap's doesn't mean that it's going to win. Indeed, eMarketer projects that most of the Snapchat's usage gains in the U.S. going forward will come from older users.
Rob Sanderson, an analyst at MKM Partners, says investors are anxious that unless [the company] quickly starts adding users, Snap's ability to sell more advertising will stabilize at some point.
With its first earnings results, Snapchat risks suffering the same fate as its social media rivals. Facebook was driven down by investor doubts about its ability to make money from mobile devices. This is a tactic that Twitter followers will be familiar with.
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