Snapchat Reaches 166 Million Daily Users

Wednesday afternoon, the company lost $6 billion in market value overnight as the stock plunged more than 20 percent.

About $2 billion of Snap's $2.2 billion net loss in the January-March period was for IPO-related stock compensation costs.

It's not unusual for tech startups to post many years of losses as they build market share and recoup their initial investments. They were trading down significantly, at some points by more than 25 percent, during after-hours trading on the NYSE.

For the first time, Snap reported quarterly earnings Wednesday, posting revenue and user growth figures that came in well below Wall Street expectations.

Revenue was $149.6 million, nearly four times as much as a year ago but falling short of Wall Street estimates of $158.6 million. Enabling users to curate their photos and videos into a daily story, Facebook quickly found that the stories format was a major hit on Instagram when it unashamedly copied Snapchat previous year.

The slow user growth is not an insurmountable obstacle for Snapchat, but one thing is certain: any "inorganic" growth they exhibit will most likely be shadowed by Facebook, including acquiring other apps with key stand-out features.

During the investor call, CEO Evan Spiegel also took the opportunity to throw scorn on Facebook's relentless copycat strategy, dubbing it the Yahoo to its Google and suggesting it will win out as the dominant platform.

Rob Sanderson, an analyst at MKM Partners, says investors are anxious that unless [the company] quickly starts adding users, Snap's ability to sell more advertising will stabilize at some point.

Average revenue per user rose 181 per cent year-on-year, but was actually down quarter-on-quarter by 14 per cent to $0.90.

"I could easily see Snapchat get distracted by trying to be the end-all-be-all for users, as they receive continued growth pressures from Wall Street", said Jessica Liu, a marketing analyst for Forrester, in an e-mail.

"It's an easy way to grow daily actives quickly but we don't think those techniques are sustainable over the long term and it impacts our relationship with customers", he said. Snaps are viewed primarily through the Snapchat application, but can also be embedded on the Web or on television in certain circumstances.

Facebook has also added Snapchat-style "Stories" and camera special effects to all its core social apps: Facebook, Messenger, WhatsApp and Instagram.

The majority of Snap's business comes from the advertising it sells around curated Stories and the channels run by publisher partners on Discover. This the biggest reason of worry for Snap, as Instagram is getting even bigger into the second quarter (Q2) of this year, with around a whopping 700 million monthly users. The format has now garnered over 200 million daily active users on Instagram, Facebook said in its most recent earnings call. 131,859,462 shares of the company's stock traded hands.

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