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Published: Sun, May 21, 2017
Economy | By Melissa Porter

Snapchat's growth stalls in Facebook's shadow in 1Q report

Snapchat's growth stalls in Facebook's shadow in 1Q report

Ahead of the quarter, the options market was pricing in a 13% move in any direction, which kept SNAP on par the movements following the initial earnings reports of other prominent IPOs, including Facebook and Twitter (TWTR).

Shares of the company plunged more than 20 percent to $18.30 in after-hours trading on Wednesday.

In the IPO filing, Snap repeatedly said its user numbers and engagement "can be lumpy and unpredictable".

Shares of the parent company of Snapchat were down on Thursday following the earnings report.

Daily users increased to 166 million, compared with 122 million from the same period last year, a 36 percent jump and its slowest year-over-year growth rate in at least two years, according to The Wall Street Journal.

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. Its nearest competitor Facebook-owned Instagram now has 700 million users, with its "Stories" feature having 200 million daily active users. But at that point, Facebook had 552 million regular users, more than three times as many as Snapchat.

Evan Spiegel, Snap's secretive 26-year-old CEO, told analysts on a conference call that he thinks about user growth "through the lens of creativity". "Just like how Google forced companies to develop their own search strategies, Snapchat is forcing competitors to develop a camera strategy", he added. Snap's user growth, it states, will be key to watch going forward. DAUs increased 5 per cent quarter-over-quarter, from 158 million in Q4 2016.

It is also registered an increase of 36 per cent on the 122 million daily users the app had this time past year. The company however is no where close to achieving profitability. Facebook, for example, has been snapping up features present in Snapchat and incorporating them into its own products. The median price target on the stock is $24. This represents a slowdown of 36% compared to the same period previous year. Facebook followed this feature launch on Instagram by bringing the same format to WhatsApp, Messenger, and Facebook itself.

A survey of more than 3,000 people in the United States revealed consumer confidence in SnapChat was quite low, with 62 percent claiming they expect a SnapChat alternative to be released to which they will switch. The update changes the way users send Snaps to each other.

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It also introduces limitless Snaps, thus allowing users to view them without any time constraints.

The announcement will show how much ad revenue the company behind the Snapchat app generated from January through March and how much money it spent on employees, technology and research.

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