Snap's shares fizzle out as its user growth falters

 
Shruti Tripathi Chopra
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Snapchat's parent company was valued at more than $30bn (£24bn) in its IPO in March (Source: Getty)

Snapchat's parent company Snap’s shares tumbled in extended trading last night as the social media giant’s rise in daily active users (DAUs) for the second quarter missed analysts’ expectations.

Its DAUs rose to 173m in the quarter from 143m in the year-earlier quarter and 166m in the previous quarter.

However, analysts on an average were expecting Snap to report 175.2m DAUs for the three months ended 30 June , data analytics firm FactSet pointed out.

Snap shares were down 13.36 per cent at $11.93 in extended trading. The stock debuted at $24, compared with its IPO price of $17.

Snap, which launched its IPO at the beginning of March this year, also revealed its revenue more-than doubled to $181.7m (£140m) in the quarter.

Read more: Has Snapchat snapped?

However, net loss widened to $443.1m, or 36 cents per share, from $115.9m, or 14 cents per share.

Excluding certain items, Snap lost 16 cents per share in the second quarter.

Norm Johnston, WPP Mindshare’s chief strategy and digital officer, said: “It’s all about growth in daily users, everything else is largely immaterial.

“DAUs have slowed down while rivals like Instagram have demonstrated considerable growth. Instagram Stories now has 250m active daily users while Snapchat has stalled at 166m. Snapchat’s sweet spot continues to be millennials but the challenge it faces is to reach an older generation, without alienating its core user base.

“Beyond user growth, Snapchat also needs to improve its metrics. Snapchat ads are expensive in comparison to other options, and with greater pressure on return on investment there’s a growing demand on it to objectively prove it delivers more than strong alternatives like Instagram.”

Johnston added that 2018 is the “make or break year for Snapchat”.

“Either it will realise its full potential by delivering growth in daily users, or it will end up as the next Twitter, clinging on to a static albeit loyal user base while its management team look for a buyer.”

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