Published: Thu, May 11, 2017
Hi-Tech | By Grace Becker

Snap shares plummet after net loss

Snap Inc., the parent company formerly known as Snapchat just released its first earnings report since its IPO, and the results aren't pretty.

Shares of the company plunged more than 20 per cent to $US18.30 in after-hours trading on Wednesday. As we stated above, for the first quarter of 2017, Snap lost $2.2 billion dollars. Meanwhile, Facebook has launched Snapchat copycat features like its own version of Stories.

To compensate for the lacklustre user growth, Snap pointed out that more than 3 billion daily snaps were created in order to underscore how actively engaged its user base is.

Snapchat reported an increase in the number of daily active users from 158 million at the start of the year to 166 million. Yesterday, the company also added a new creativity tool, Magic Eraser, that lets users edit objects from their Snaps before sending. Snapchat has fought back, rolling out a Stories Search feature for certain topical posts and launching a slate of new creative tools.

"We still have a lot of work to do, but I'm excited by the amount of progress we've made in such a short time", Evan Spiegel, chief executive of Snap, said on the call.

In its IPO filing, Snap revealed that it had not been profitable since beginning commercial operations in 2011, with an accumulated deficit of $1.2 billion.

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Essentially, if Snapchat can't grow like Facebook, can it monetize like Facebook?

Snapchat, however, has already been more than eclipsed by Instagram Stories.

This is a big change to initial set up of the app, which saw photos and videos disappear after 10 seconds. Not only did the company miss expectations, it showed slowing users growth and posted enormous losses for the quarter.

All the copying appears to be paying off for Facebook.

When pressed on the call about competing with Facebook, Spiegel said he expects that "everyone is going to develop a camera strategy".

"Right now they clearly have a loyal user base in the younger population, but the over 30 year old demographic is one of the most attractive segments for advertisers due to their spending power", Eric Kim, managing partner at venture capital firm Goodwater Capital, wrote in a report.

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