Snap shares dive 17% as user growth slows

Aug 11, 2017 | Mobile, Online advertising, Social media

Snapchat shares have plummeted 17% as the social media firm saw user numbers and revenues grow slower than expected and losses rise nearly fourfold, amid increasing competition from Instagram.

Losses widened nearly fourfold compared to the same period last year, to $443m, but it was fears about the pace of growth that worried investors.

Snapchat saw its number of daily active users rise to 173 million in the three months to the end of June, up from 166 million in the previous quarter – but this was below the 175 million expected by analysts.

Revenues rose to $182m, more than double the figure for the same period last year – but investors had been looking for a figure of around $186m.

The news comes as Facebook’s Instagram continues to encroach on Snapchat’s users, by offering simlar features. Instagram Stories, which has features similar to the Snapchat disappearing message app, launched a year ago and has seen user numbers climb to 250 million.

Snap chief executive Evan Spiegel said he and co-founder Bobby Murphy “believe deeply” in the long-term success of the company and would not cash in by selling any of their shares this year, as a sign of confidence in the firm’s prospects.

“We believe deeply in the long-term success of Snap,” he told analysts on a call after the results were released.

Snap made its name as a messaging app, with texts that would disappear. It now offers video stories, maps and other features.

The firm said it is working to woo advertisers with low prices and evidence that its ads are working – features it hopes will set it apart from rivals.

Revenue over the three months to the end of June was $181.7m, more than double the same period in 2016.

But expenses grew even faster, reaching more than $630.6m for the quarter, including expenses related to stock-based compensation.

Snap’s user base increased by more than 20% year-on-year. But the firm added just seven million new users in the quarter, compared to eight million in the first three months of the year.

Spiegel estimated that a quarter of people with smart phones in the US, UK and France use Snapchat every day, with users typically spending more than 30 minutes daily on the site.

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