It seems like Snapchat's (SNAP ) first quarterly earnings have lost control and have, well, snapped.
In a surprisingly, downwards twisting spiral, Snapchat's first days as an IPO are proving to be negative. With the recent announcement of Snapchat's 24% decrease in stock price on May 10th, resulting in a net loss of $2.2 billion for the entire quarter, Snapchat suffered heavy losses that are causing some to question whether it will stand firm against other social media companies, or succumb to the market itself. Snapchat, an image messaging social media application, was released in 2011 by current Snapchat CEO Evan Spiegel, and his former classmates Bobby Murphy and Reggie Brown. Offering disappearing photos that can last up to 10 seconds, Snapchat began as 'Picaboo' and quickly gained traction among the millennial generation. With the addition of a 'story' in 2013, a collection of photos and videos that are broadcasted to one's contacts, Snapchat further bridged the lines between social interaction that rivaled those of other social media companies. Along with the rise in social interaction over Snapchat, the young company launched a section titled 'Discover' in 2015 that features different ad-supported stories from various companies. If not enough, Snapchat's infamous face filters have saturated the internet, launching Snapchat into a world wide used application. The addition of different features over time seem to prove effective, leading up to Snapchat's present boasting of approximately 166 million daily users.
With Snapchat providing commonly used social interaction, this causes many to wonder where Snapchat went wrong after the loss of billions of dollars for their first quarter. In addition to their loss, Snapchat was only able to post sales of $149.6 million for their quarter in March, and only boast of adding 8 million daily users to its platform. As if that weren't enough, the slow addition of new users began at the end of 2016, with a decrease at approximately 50% from 10 million daily users to 5 million. This slower increase in users proves to be dangerous, not only for Snapchat's revenues as a whole, but also because it occurred in tandem with Facebook's
Facebook's adaption of the 'Stories' feature on Instagram led CEO Mark Zuckerberg to boast that Instagram maintains 200 million users, more than Snapchat's amount of daily users altogether. On an earnings call, Zuckerberg later stated "I think we were a little bit late to the trend initially around making cameras the center of how sharing works, but I do think at this point, we're pretty much ahead in terms of the technology that we're building." In a not-so-subtle approach, Facebook seems to be beating Snapchat at its own game.
In addition, Facebook's method of business through advertising only fosters its growth as a social media network. Due to Facebook's acquirement of preferences in advertising for each user, coupled with this data going to advertisers themselves, Facebook has the ability to offer perfectly crafted advertisements to each and every Facebook user. In comparison to Snapchat, who offers a variety of advertisements, Facebook seems to be maintaining its daily user amount while simultaneously taking in revenue.
While Zuckerberg appears confident in Facebook's modification towards photo sharing over social media applications, Spiegel still maintains that Snapchat has something special. The young business tycoon reinforced his confidence in Snapchat, stating "At the end of the day, just because Yahoo has a search box, it doesn't mean they're Google."
