Duopoly Safe For Now As Snap's First Earnings Disappoint

Jay Anderson
May 18, 2017

Snap's shares plummeted moments after it released a troubling first quarter earnings report on Wednesday, its first since going public. 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. Losses this quarter amount to $2.2 billion after the company issued stock bonus compensations following its successful IPO, out of which CEO Evan Spiegel himself got $750 million. However Instagram stories, a feature launched by Facebook owned Instagram which copies heavily from Snapchat has reported 200 million daily active users. Snap lost $2.31 per share in the first quarter, compared with 14 cents a year ago.

Spiegel and other executives offered few details on other parts of Snap's business, though Spiegel said that the firm's Snapchat Spectacles - the company's sunglasses with an embedded camera - generated around $8 million in revenue this quarter.

Snapchat has tried to become more like its bigger rival by courting new users and, with them, advertisers. In fact, the Snapchat maker's share price quickly fell by more than 20% during after-hours trading, as of 6:00 p.m. The company, founded in 2011, lost more than $500 million previous year on revenue of about $400 million, it disclosed in regulatory filings.

Before Snap went public, the competition between the company and Instagram's Stories was heating up.

Year-on-year growth in users was 36%, slowing from 48% in the fourth quarter and 63% in the third quarter. The slowing growth was blamed on Facebook's concerted efforts to mimic Snapchat's unique features, with Instagram's Stories feature outpacing Snapchat's own and reaching 200m DAUs.

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As we've often written before, the market tends to overreact to good news and bad news alike, so it's possible SNAP's share price dip won't last.

Facebook Inc had also plunged after posting results for the first time in 2012, but has since ensconced itself as a Wall Street darling by transforming the company into an advertising giant.

On average, users are spending 30 minutes and creating 3 billion snaps per day on Snapchat. That Facebook is going after Snapchat is not news, but the battle has now become somewhat ugly.

"At the end of the day, just because Yahoo is a search box, it doesn't mean it's Google", he told investors.

Other reports by BadHub

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