Snapchat's rapid growth rate is disappearing

Snap needs better numbers to take on Facebook

Snap needs better numbers to take on Facebook

But it wasn't all bad news.

In the second quarter, the struggling social network also reported lower-than-expected average revenue per user of $1.05. But the metrics the company shared on both user activity and its ability to monetize them show Snap is still battling its way up a hill, where Facebook and Instagram are standing. That figure was equal to the revenue per user Snap posted in the fourth quarter of a year ago. But unlike Twitter, Snapchat did manage to add 7.3 million new daily users in the last three months. UBS AG raised shares of Snap from a "market perform" rating to an "outperform" rating and reduced their target price for the company from $24.00 to $19.00 in a report on Thursday, May 11th. Investors are anxious the app maker won't be able to grow its ad business in the face of mounting competition from Facebook.

CEO Evan Spiegel kicked off this quarter's earnings call with analysts.

Also adding to the uncertainty were signals that Snap was focusing on controlling costs rather than expanding its user base outside of North America and Europe.

Until now. Facebook's Instagram Stories, a clear Snapchat clone, has more daily users than Snapchat itself — and parent company Snap Inc. should be very anxious.

But it is not all doom and gloom: Snapchat still has far deeper engagement, with the average user spending more than twice the time in the app than the typical Instagrammer.

Snapchat, in comparison, had 173 million in the second quarter - and that's all of Snapchat, not just its version of Stories.


Instagram Stories, which debuted a year ago, had 250 million users as of June, up from 200 million in April.

"Given the amount of speculation around the lock-up expiration, I feel it is important to note that Bobby and I will not sell any of our shares this year", Spiegel said on a call with analysts. The pair's post-IPO lockup will expire Monday. He went on to say the two execs "believe deeply in the long-term success of Snap".

Snap has not delivered on either front. Jefferies Group LLC's target price would indicate a potential upside of 16.19% from the company's current price.

Snap Inc, formerly Snapchat, Inc, is a camera company.

Global Equities Research analyst Trip Chowdhry stamped Snap "total junk", arguing that it lacks the fundamentals to succeed. Headcount in the second quarter grew 10 percent to 2,600, down from the 27 percent growth rate in the previous quarter. Its confirmed acquisition of the ad company Placed will be reflected in its third-quarter financials, as that deal was closed in July. Google is reportedly working on Stamp, which The Wall Street Journal compared to Snapchat's Discover feature for letting people find photo and video-heavy news items.

If that's the case, it's time for Spiegel to rethink things.

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