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Shares in Snap (Snapchat’s parent company) have fallen after they reported disappointing growth in this year’s first quarter.
In its first results since it’s IPO, Snap said the number of daily active users rose just 5% to 166 million.
That was two million fewer than projected, but 36% higher than the same period last year, The worrying news sent shares down more than 20% in after-hours trading in New York.
I am not sure about anyone else but I very much expected this, It was blatantly obvious Snap was a hype beast, all the perception and talk about building a brand simply negated the fact that at best the business foundation of the business was shaky, not to mention the threat of being killed by Instagram/Facebook which in my opinion was inevitable and of course is happening. Investors probably weren’t expecting much, but sure to be disappointed and regretting being taken for a ride based on hype. Huge losses, poor growth, and no immediate sign that the company has any plan to fight off Facebook’s competition.
— Henry Joseph-Grant (@speirin) March 2, 2017
Snap’s adjusted loss of $188.2m was about $10m higher than analysts had expected, while the net loss soared to $2.2bn from $104.6m due to costs associated with the IPO earlier this year.
Revenue rose 286% for the quarter to almost $150m but was also short of forecasts by about $9m.
Snap CEO Evan Spiegel said its low daily active user numbers were due to not bugging users with constant notifications and updates, there’s an old saying that I love “No excuse is good enough” and Evan’s attempt to make an excuse to justify the unjustifiable is not what Snap needs, seasoned investors and analysts surely won’t believe him, even if they do give him the benefit of the doubt for the first quarter. Snap needs to fix this and fast.
Analysts remained sceptical of Snap’s long-term prospects. Ross Gerber of Gerber Kawasaki tweeted: “Snap user growth is almost zero. Losing $50 mil a month. This is so poorly run. Run and hide. This is worse than Twitter.”
Evan said on a conference call the company had been working on performance improvements and promoting its Android app, which could offer more growth globally compared with Apple’s iOS.
“We still have a lot of work to do, but we are excited by the amount of progress we have made in such a short time,” he said, a brave face given that both he and his co-founder Robert Murphy lost $1Billion each in the value of their stock.
Asked if he feared Snap would be crushed by Facebook, Evan replied: “You have to get comfortable with the fact that people are going to copy you if you make great stuff. Just because Yahoo has a search box, it doesn’t mean they’re Google.”
This is a poor and naive comparison, Facebook are no Yahoo, they have the user base already that Snap needs to acquire, whilst they also have proven they offer a reliable and proven marketing channel at scale. Liquidity between both means they are much better placed than Snap, this isn’t about replication, it is about execution. Snap needs to show how they are going to grow and what will differentiate them from Facebook.
— Henry Joseph-Grant (@speirin) February 8, 2017
As much as people love to knock Twitter, I actually find it amazing that Twitter’s market cap ($13.59Bn) is so much smaller than Snap ($27.98Bn) as I’ve been super impressed in the past year how much Twitter’s performance has improved and the analytics they offer are great. I have no doubt that Snap’s slowing growth and ultimately losing hype will be great news for Twitter, as brands (and their marketing dollars) retreat from the platform. Jack Dorsey surely will be relieved that Analysts that normally criticise Twitter now have a new punchbag in Snap.
— Henry Joseph-Grant (@speirin) April 6, 2017
For you millennials out there, expect Snapchat to be Spamchat over the next few months as they desperately attempt to get back on track and growing…
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