Snapchat warned investors before its first earnings call that it may never make a profit. The $188.2m adjusted loss it reported last night for the first quarter of the year was $10m more than analysts had expected though, causing shares to fall through the floor by 24 percent in after-hours trading in New York last night.
Even more concerningly for the company’s outlook, user growth continued to stagnate. The company was expected to gain around 10 million users. Only 8 million more people actually signed up though, leading to a rise of 5% to 166 million over the previous quarter.
During the earnings call, Snap CEO Evan Spiegel attempted to explain Snapchat’s growth issues. As Business Insider reports, Spiegel suggested that Snapchat is being unfairly compared to companies like Facebook that use “growth hacking” to rapidly scale their businesses.
This term refers to the borderline-intrusive push notifications and other “unnatural” engagement methods Facebook employs. These get people to sign up and keep coming back but are interpreted as artificial growth enablers within some circles.
“There’s a lot of this thing in our industry called ‘growth hacking’ where you send a lot of push notifications to users or you try to get them to do things that might be unnatural, or something like that,” Spiegel said during the earnings call.
He went on to imply that Snapchat is a less intrusive app that could exhibit extended long-term growth due to its slower rate of expansion. Spiegel claimed that Snapchat’s lack of an “add your contacts” notification at the app’s launch helped people to feel more comfortable using its features. He noted that encouraging you to upload your entire contact book would prevent you from knowing who’s viewing your content.
Although Spiegel’s staying optimistic, analysts are less cheerful. Snapchat didn’t make any major feature announcements during the earnings call and it unveiled no new partnerships with media companies. The app’s developer teams have apparently been “working on the quality of Snapchat” on Android devices, finally addressing longstanding bugs that have been attributed to a slow in user growth.
The worse-than-expected earnings call has led some analysts to suggest Snapchat risks being entirely overstepped by the sheer size of Facebook. In recent months, the company has relentlessly pursued Snapchat’s audience, copying its features into all its main apps. Instagram’s Stories feature is now bigger than the Snapchat original.
Facebook also has a far more developed presence in regions that are only just being connected to the web, an area Snapchat will need to improve on if it’s to continue its growth. The threat of Facebook doesn’t faze Spiegel though: asked whether he’s concerned about the company’s feature copying, he told the call “just because Yahoo has a search box doesn’t mean they’re Google.” Facebook may have met with criticism for its approach from many quarters but it looks like Spiegel is willing to engage in a healthy rivalry.
