Slow user growth worsens Snap Inc’s $2.2 billion loss during first quarter

Snap Inc. fell short of revenue forecasts last week when it revealed its quarter results as a public company for the first time. The much hyped start-up quickly saw excitement fade as it reported a loss of $2.2 billion on $150 million in revenues. Crushingly, revenues missed analyst targets of $158 million.

EBITDA dropped $188 million in 2017, which leaves investors guessing whether the company does have a path to profits in place.

Given the firm’s disappointing ad sales, its value dropped more than a fifth on Thursday and analysts are torn on whether it can make a Facebook-style comeback.

It has been argued that the earnings miss may have been down to interpretational issues. However, user growth rates presented yet another blow. Snap’s daily active user growth was up 5% to 166 million DAUs compared to a 3.2% growth during Q4 2016. Year-on-year growth rates declined to 36% from 48% in Q4.

The weak user increase is troubling, particularly in North America – the company’s home turf, where it added just three million new users during the quarter period. In Europe, Snap reached 55 million DAUs and in the rest of the world it expanded to 40 million DAUs, adding one million new users.

Quarterly average revenue per user dropped from $1.05 in Q4 2016 to $0.90 in Q1 2017.

In light of the announcement, shares dropped 24% and are currently trading at around $19.14.

It remains to be seen if Snapchat can recover and build up its audience and advertising opportunities to boost earnings. Arguably though without a significant rise in user growth advertisers are likely to stay away.