Snap’s Loss Nearly Quadruples as Revenue and User Growth Slow
origin : WSJ
Date : 2017-08-11
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Snap Inc. said its quarterly loss nearly quadrupled amid slowing revenue and user growth, sapped by intensifying competition from larger rival Facebook Inc. The parent company of messaging app Snapchat said Thursday that revenue more than doubled in the second quarter to $182 million from $71.8 million a year earlier. Yet that growth rate was about half what it was in the first quarter, and slower than investors expected for a company that says it still has ample room to grow. Snap’s second-quarter loss ballooned to $443 million from $116 million a year earlier. Snap’s incremental gain in daily users compares with the galloping growth Facebook saw for Instagram Stories, packages of ephemeral photos and videos that copy Snapchat’s “Stories,” one of its most popular features. Snap added 15 million new daily users in the first half of the year-of which 7.3 million joined in the second quarter-compared with Instagram Stories’ 100 million new daily users between January and June. “Snap has gone from industry darling to troubled child overnight,” said Bryan Wiener, chairman of advertising agency 360i. “We made a lot of great progress this quarter,” said Snap Chief Executive Evan Spiegel. He said user growth was “solid” and that the company is “still in the very early stages” of monetizing. Snap’s stock was trading down 17% in after-hours trading, hitting new lows. Its stock has lost 44% since its listing in March to its close on Thursday at $13.77. Before Snap went public, its fast growth as a startup and high engagement among users-especially those in their teens and 20s-wowed investors and scared competitors. Advertisers saw it as a way to reach users who weren’t tuning into traditional media or other social networks such as Facebook. But Facebook noticed Snap’s traction and set a bull’s eye on it. Beginning with “Stories,” Facebook has rolled out a series of features that emulate Snapchat’s most popular elements, including image filters and stickers. “Facebook’s Instagram game made this even harder for Snap than it was six months ago,” said Michael Nathanson, senior analyst at MoffettNathanson. For advertisers, Instagram’s similarities to Snapchat can make it harder for them to justify spending more on campaigns for Snapchat, because Facebook provides them more ways to target and measure the impacts of their campaigns. Snap’s stock-market debut shifted the conversations advertisers are having about the social-messaging company, marketers say. When the early buzz was around how Snapchat was “taking millennials and Gen Z by storm, the conversation in the boardroom among CMOs was what are we doing about this,” said Mr. Wiener. “Now they are questioning whether Snap is viable.” Historically, the second quarter has been a strong quarter for advertising, Mr. Wiener says, partly due to a string of holidays that spur shopping, such as Mother’s Day and Father’s Day. In the first quarter, Snap attributed a sequential decline in revenue in part to seasonal trends. In an effort to reassure investors, Snap co-founder and Chief Executive Evan Spiegel emphasized the avenues for growth ahead. He highlighted Snap’s new automated ad-selling platform, fresh products like Maps, and the increased attention devoted to Snapchat’s Android app, which has lagged behind the performance of the iOS version and limited its ability to grow. Mr. Spiegel said Snap has already addressed most of the obvious items that held back Android performance, but noted the remaining improvements required will come from larger changes to the app that will take some time. Mr. Spiegel offered a personal vote of confidence, pledging that he and co-founder Bobby Murphy won’t sell any of their shares in Snap this year, except for those Snap will withhold to satisfy tax obligations related to the shares. The attribution of stock options dented Snap’s bottom line. Stock-based compensation cost the company $242 million in the second quarter, much lower than the $2 billion one-time hit in the first quarter following its IPO.