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Snapchat Earnings Disappoint With Slow User Growth, Lower-Than-Expected Revenue

Cue up jokes about disappearing market capitalization: Snap, the company best known for its Snapchat service, reported its first-ever quarterly earnings Wednesday, and the numbers didn’t go over well with investors.

Snap reported $149.65 million in revenue for its Q1 of 2017 Wednesday, compared to just $38.8 million for the same quarter last year. The company had a net loss of $2.2 billion, compared to $104.58 million for Q1 of 2016. However, much of that was due to stock-based compensation, with $750 million alone going to CEO Evan Spiegel. The operating expenses for the quarter were $196 million.

Analysts had expected revenue to come in at $158 million. Shares of Snap were down 23% in after-hours trading.

Investors weren’t only dismayed by Snap missing on revenue, but also by much slower-than-expected user growth numbers. Snapchat’s daily active users grew to 166 million for the quarter. That’s a 36% year-over-year increase, but only a tad better than Snapchat did at the end of last year.

Snap announced at the time of its IPO in March that it had 161 million daily active users on average in December. The company does not provide any monthly active user numbers.

These user numbers are in stark contrast to significant growth at Facebook, Snap’s biggest competitor. Not only is Facebook a lot bigger than Snapchat, attracting 1.28 billion daily active users for its service in Q1, the company also seems to succeed in copying some of Snapchat’s core features.

Facebook announced during its most recent earnings call that its messaging app Whatsapp now has 175 million daily active users for its Snapchat Stories-like Status feature. Facebook previously announced that Instagram’s Snapchat Stories clone is being used by more than 200 million people every day.

A closer look at Snap’s revenue numbers also likely won’t calm the markets. The company generated $0.90 with each user in Q1 of 2017. That’s up significantly from a year ago, when each user only brought in $0.32. But it’s down from Q4, when the average revenue per user was $1.05. Seasonal fluctuation is typical for these revenue numbers, but Snapchat is still early in its monetization strategy, so investors had expected growth to continue.

Snap’s executives did share some positive metrics during the company’s first-ever earnings call: Snapchat’s users spent over 30 minutes per day in the app, according to Spiegel. They also created more than 3 billion snaps every single day.

Also interesting: Snap’s CFO Drew Vollero said that the company generated $8.3 million of “other” revenue during the quarter, which was primarily driven by sales of the company’s Spectacles glasses. This would mean that Snap sold less than 62,000 Spectacles during the quarter.

During Q4 of 2016, when the company first began selling Spectacles, the revenue for this category was north of $4 million. This would suggest that Snapchat has sold fewer than 100,000 Spectacles to date. Vollero went on to call the company’s sales of Spectacles “a very modest program,” and Spiegel said that Spectacles users have taken 5 million snaps to date.

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