Snapchat's disappointing growth leads to shares slump

Shares in Snap have sunk after its app, Snapchat saw disappointing user growth. The photo sharing app only saw a 5% rise in terms of users, up to 166 million since the last three months of 2016. The company had aimed to accrue a further two million new users. The company's shares fell more than 20% in after-hours trading in New York.

The bad news doesn't end there for the company as it fell short of several other targets. The company's adjusted loss was $10 million higher than analysts had expected while its net loss went from $104.6 million to $2.2 billion due to costs related to the initial public offering (IPO) earlier this year. While the company's revenue rose 286% to nearly $150 million, it was short of forecasts by $9 million.

Snap is facing a similar issue that Twitter has faced ever since going public; it's losing money, Ross Gerber an analyst at Gerber Kawasaki tweeted:

“Snap user growth is almost zero. Losing $50 mil a month. This is so poorly run. Run and hide. This is worse than Twitter.”

Another factor hurting Snap shares is their perceived lack of ability to differentiate themselves from rivals. Facebook, for example, has been snapping up features present in Snapchat and incorporating them into its own products. Evan Spiegel, Snapchat founder, when asked about Facebook copying features from Snapchat said:

“You have to get comfortable with the fact that people are going to copy you if you make great stuff. Just because Yahoo has a search box, it doesn't mean they're Google.”

It remains to be see how well and for how long Snap can weather its competition in light of less than flattering analyst assessments.

Source: BBC News

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