Snap Inc.’s growth again fell short of estimates, feeding fears that aggressive competition from Facebook Inc. is blunting the younger social-media company’s potential just months after its IPO.
The Los Angeles-based company said daily active users reached 173 million in the second quarter, compared with 166 million in the prior period. Analysts polled by Bloomberg had expected 175 million on average. Revenue also disappointed, and the shares tumbled as much as 18 percent in late trading.
Since its March public debut, the maker of the Snapchat mobile application for sending disappearing photos and videos has said it would become more popular as the company innovates and adds tools. In the second quarter, Snap added a maps function for users to see where friends are, as well as a search section.
Yet rival Facebook has been successfully copying some of Snap’s key features on its larger social-media properties, drawing away users that might otherwise have downloaded Snapchat.
Facebook is also exerting pressure in the mobile advertising market. Snap said quarterly revenue was $181.7 million, missing the $185.8 million average estimate of analysts surveyed by Bloomberg. While Snap has been updating its offerings to give advertisers more sophisticated options, the company has been struggling to prove it can secure its position in a market dominated by Facebook and Alphabet’s Google Inc.
This was a “make or break quarter” for Snap, James Cakmak, an analyst at Monness, Crespi Hardt & Co., said. “Snap has tremendous potential if it can capitalise on the opportunity in front of it as an alternative platform for advertisers,” but the company is “under pressure from multiple fronts.”
The company’s shares slid as low as $11.31 in extended trading following its earnings release. On a call with investors recently, co-founder and CEO Evan Spiegel dismissed the threat from rivals.
“We’ve always been last to market competing against giant companies, and we’ve historically been able to grow our business in markets that are highly competitive and saturated by our competitors because we’re so focused on innovation,” he said.