Snapchat’s parent company Snap Inc lost nearly a quarter of its value on Wednesday when its newly listed shares went into a nosedive after the company reported a $2.2bn loss and slowing growth, reports The Guardian.
Snap’s shares closed the day at $22.98 and fell close to 25% in after hours trading.
This was the first time Snap has had to publish its earnings since it made its initial public offering (IPO) in March, which valued the company at $28bn. Since then, the company has been trying to convince Wall Street that it can make money from advertising at a time when rival Facebook has been pushing aggressively into Snap’s territory.
Snap reported 166m daily users at the end of March, up 5 per cent from the previous quarter. The number was below analysts’ expectations and year-on-year growth also slipped to 36 per cent from 48 per cent in the previous quarter. Snap reported $150m in revenue, versus the $158m expected by Thomson Reuters.
Most of the company’s losses went in compensation to Snap’s staff after the IPO.
Snap CEO Evan Spiegel said in the earnings call that the company refuses to engage in the type of “growth hacking” used by other companies, including sending lots of push notifications to get users to “do something unnatural”.
“It’s an easy way to grow daily actives quickly but we don’t think those techniques are sustainable over the long term and it impacts our relationship with customers,” he said.
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.
Facebook, which once made a $3bn bid for Snapchat, has upped the ante by making the camera a central piece of its apps and offering features similar to Snap on its platforms, including Instagram and WhatsApp. The company recently said Instagram Stories alone had reached 200 million daily active users.
Spiegel had a biting response to Facebook’s copycat tactics: “Just because Yahoo has a search box doesn’t make it Google.”