Snapchat Unable to Snap Out of its Losing Streak

By Sonya Xu


The white ghost on a tiny yellow square is not an uncommon sight for college students and teenagers all around the world. For investors this week, Snapchat was also in the spotlight.

On Tuesday, Snap (SNAP), the parent company of Snapchat, released its earnings report; it’s losses tripled in the third quarter. After the report was released, the stock plummeted by 20 percent in after-hours trading. Eight months have passed since its IPO, and Snap has seen slow growth. It currently trades at approximately 50 percent below its peak in March.

In addition to poor earnings, Snapchat only added 4.5 million active daily users in the third quarter for a total of 178 million daily users. Snapchat’s competitor, Instagram, which has Instagram Stories, its own version of stories, increased users to 300 million. Furthermore, Snapchat’s Snap Spectacles also proved to be a fiasco, costing them almost $40 million in unsold hardware.

Users have complained about the user-friendliness of Snapchat. Snap CEO Evan Spiegel sees this as an area of improvement. While it succeeds in attracting iOS users, Snap has struggled to attract users on Android. Internationally, Android proves to be the dominant platform in many markets.

On Wednesday, WeChat owner Tenecent (TCEHY) purchased over 145 million of Snap’s shares. This turns out to be a bit over 10 percent of the company. In comparison, WeChat has almost 1 billion active monthly users. Tenecent said it "looks forward to sharing ideas" with Snap.

Nevertheless, Snap admits that redesigning the app will be a bumpy path ahead. "There has been a ton of change in a very short period of time," Spiegel said on an earnings call on Tuesday. "That's been the case over the life of the business...We're not afraid to make changes in the long-term interest of the business."