Snapchat shares tumble as results miss Wall Street targets

Traders gather at the post where Snap Inc. is traded on the floor of the NYSE

Traders gather at the post where Snap Inc. is traded on the floor of the NYSE

On average, equities analysts anticipate that Snap will post ($0.54) earnings per share for the current fiscal year.

Over time, however, the company introduced new tools and features aimed at engaging users in new ways that also appealed to marketers. US Bancorp DE purchased a new position in Snap during the first quarter valued at about $101,000.

Snap's stock fell $5.50, or 24 percent, to $17.48 in after-hours trading. So bad that company CEO Evan Spiegel just took a major hit in the net worth department.

- How is Snap monitoring the number of ads shown to users to ensure they aren't frustrated or turned away from the app entirely?

Bank of New York Mellon Corp purchased a new position in Snap during the first quarter valued at about $525,000.

Spiegel, who received a stock-based bonus worth almost $600 million for taking the company public, is 26, and co-founder and Chief Technology Officer Bobby Murphy is 28. That could be a plausible explanation for Snapchat's own slow user growth over the Jan-Mar quarter.

"The No. 1 question we receive about Snap is can it sustain its user growth and how big can it be", Ralph Schackart, an analyst with William Blair, wrote in an investor note this month.

It is also an increase of 36% on the 122 million daily users the app had this time previous year. Its nearest competitor Facebook-owned Instagram now has 700 million users, with its "Stories" feature having 200 million daily active users. The update changes the way users send Snaps to each other.

In the past, Facebook has tried to buy what is now Snap Inc., the camera company, but it was never successful. But with Snap continuing to lose staggering amounts of money - more than $2 billion in the first three months of the year alone - conventional metrics don't apply.

All the copying appears to be paying off for Facebook.

One of the most important Snapchat metrics that Wall Street is looking for is user growth, measured in daily active users.

At its recently concluded F8 developer conference in San Jose in the US, CEO Mark Zuckerberg launched "Camera Effects Platform" to encourage augmented reality (AR) effects.

"People are going to copy your product if you build great stuff", Spiegel said.

"Just because Yahoo has a search box doesn't mean they're Google", he said.

"If we had just in the beginning encouraged snapchatters to add all their friends in (their) contact book instead of just few of them, they might be really uncomfortable creating snaps and adding them to their stories", he said, according to a transcript of the call.

Facebook and outside research firms say some of the new, individual features have more users than all of Snapchat.

With its first earnings results, Snapchat risks suffering the same fate as its social media rivals.

But Snap's Q1 earnings report suggests that Facebook's strategy is working. This is a tactic that Twitter followers will be familiar with. He blamed the underwhelming results on comparisons to other companies that fudge their numbers with excessive notifications and other "growth hacks".

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