Snap Stocks Tumbles 26 Percent

May 12, 2017 | | Comments 0

Snap Inc. added fewer users than projected in the first quarter, a sign that Facebook Inc.’s strategy of copycatting virtually every feature of its Snapchat app is taking a toll on the newly public company. The stock tumbled 26 percent.

In its debut earnings report after a March initial public offering, Snap, whose mobile app lets users send disappearing video and photo messages, said it added 8 million daily active users in the period, for a total of 166 million, with growth from a year earlier slowing to 36 percent. Revenue also fell short of analysts’ estimates.

Snap is working to prove that it can attract a dedicated young audience in the competitive social-messaging market, justifying a market value of almost $27 billion. The Snapchat app initially drew attention for letting people add fun filters and overlays to their mobile photos and videos, virtually turning human faces into puppies or crowning them with flowers. In the past six months, Facebook has adopted many of the same features for its own social applications, including Instagram. To keep wooing users and building up ad revenue, Snap has to move faster than its larger competitor.

“They have to prove that they can keep innovating features, products, and functionality that makes Snapchat engaging for consumers and useful for advertisers,” said Mark Mahaney, an analyst at RBC Capital Markets. “All of these innovations that Facebook and Instagram are making could be undermining the growth of Snapchat.”

The company’s shares, which had gained 35 percent since its March 1 IPO at $17, dropped as low as $17.07 in extended trading following the report.

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