Snap’s CEO Evan Spiegel Sees a $1b Reduction in Wealth Following Earnings Report

The rollercoaster ride continues for Snapchat, the most widely used photo filter app, as its annual growth estimates take another nosedive. The culprits? A shroud of speculation regarding competition from Facebook and flagging confidence in the potential of Los Angeles-based Snap. This comes just months after its IPO, which in retrospect, might have served as an inadvertent peak from which to tumble.

In the second quarter, Snap reported a daily active user base of roughly 173 million, a slight uptick from the preceding quarter’s count of 166 million. However, these numbers fell short of the 175 million users that analysts, surveyed by Bloomberg, were anticipating. Snap’s diminishing fortunes didn’t end there; disappointing revenue figures precipitated an 18% drop in shares in after-hours trading.

Since its public debut last March, Snap had pinned its hopes on Snapchat, an app that lets users send ephemeral photos and videos. Anticipating steady user growth, the company pressed on with plans for innovative features and tools. The second quarter saw the introduction of a mapping feature, enabling users to view friends’ locations, and a searchable section. But Facebook, Snap’s biggest competitor and least secretive admirer, was busy replicating some of these key features across its more established social media landscape, thwarting Snap’s plan by diverting Snapchat’s potential adopters.

In the high-stakes game of mobile advertising, Facebook continues to wear the crown. Snap’s quarterly earnings of $181.7 million failed to meet analysts’ expectations, averaging about $185.8 million as surveyed by Bloomberg. Despite the introduction of sophisticated advertiser options and concerted resource pulling, Snap is still inching rather than vaulting towards a secure position in a market monopolized by the Facebook-Google duopoly.

Analyst James Cakmak of Monness, Crespi, Hardt & Co. echoes these sentiments. On a note to investors, he labeled Snap’s recent performance as a ‘make or break’ quarter, voicing optimism over the company’s potential only if it can seize opportunities in its capacity as an alternative platform for advertisers. As things stand, Snap is under considerable pressure on multiple fronts.

In the wake of the lackluster earnings release, Snap’s shares plummeted to a meager $11.31 in extended trading. Since its debut at $17 a share in March 2017, the stock price has noticeably deflated, closing at $13.77 in New York this past Thursday.

In a call to investors, Snap’s CEO Evan Spiegel urged a change in perspective, suggesting they view Snapchat differently from Facebook. Affirming the company’s commitment to innovation despite coming last to market, Spiegel is relying on innovation to stave off competition and sustain growth.