Snap remains positive despite reporting losses of $400 million

Following a loss of $400 million in Q2, Snap Inc shares dropped 14% on Thursday.

The company reported a revenue of $182 million, up from $71.8 million for the second quarter. However, it still fell slightly short of analyst forecasts at $186.2 million.

Daily active users of Snapchat increased 7.3 million during the second quarter representing a drop from 8 million reported in Q1. Although daily active users reached 173 million, analysts had expected 174.6 million.

Despite the underwhelming results, the company remained optimistic in an earnings call, promising that its advertising products would have great potential. According to Snap, its self-serve platform already accounted for 60% of ad sales and would only increase revenues in the future.

Chief executive Evan Spiegel confirmed that he would not sell any shares, because he “believe[s] deeply in the long-term success of Snap”.

In addition, the company’s chief strategy officer Imran Khan added that Snap would continue to expand its advertising product portfolio and focus on boosting its ad efforts. He hopes that the self-serve ad platform ultimately can drive growth with new and existing advertisers.

Although the latest financial results are a bit of a blow for Snap Inc, there are still a few positive factors to consider. Of the seven million new users that Snapchat added, four million were added in North America, which together with Canada represents half of the app’s global ad spend.

In addition, actual app usage still seems high with daily users under the age of 25 years spending around 40 minutes per day on the app.

However, it’s not entirely clear if those users will be hanging around in five years time. Indeed, research by Fluent this year found that almost half of Americans believed that Snapchat was just a fad. Of those using the app, fewer believed that they would continue to use the app in five years time (65%) compared to rival Facebook (87%).

It may still be early days for Snapchat. If the app can retain a competitive edge it could still see a significant turn-around on latest revenue trends.