Snapchat parent tanks after reporting $2.2bn loss

Snap Inc, the recently-listed parent company of messaging app Snapchat, plummeted almost 25% in New York on Wednesday after its first ever quarterly earnings report.

The tech firm reported a loss of $2.2bn during the period directly after its initial public offering in March, and is currently struggling to convince investors that its business model is profitable.

In terms of user growth, Snapchat saw its daily active users increase by 36% year-over-year, including a 6% rise in comparison with the previous quarter.

Snap gains the majority of its revenue from advertisers, similar to many of its main competitors, such as the likes of Facebook and its ever-expanding network of social media apps. Facebook has been combating the rise of Snap by launching similar features, such as the 'Stories' functions.

The company went public at $17 per share, before quickly rising as high as $29. After Wednesday’s losses, Snap now sits at $22.98 per share.

USER GROWTH

CEO Evan Spiegel said in an earnings call that the loss was not as significant as it seemed, adding that its focus would be to continue to grow user growth while not diminishing the quality of its services.

"The more that we can remove friction from this creative process, the more that people want to use this service, and that's our strategy," Spiegel said.

Spiegel also aimed a dig towards Mark Zuckerberg's company, suggesting that its shift towards camera-focused social media doesn’t necessarily mean that it was a better option than Snapchat.

"Just because Yahoo has a search box doesn’t make it Google," Spiegel said.

CMC Markets analyst Michael Hewson said that the expectations placed on Snap in the wake of its flotation presents risk for investors.

Hewson said: "The biggest risk to investors remains the sky high expectations around the stock, particularly given its demographic of 18-24 year olds and the fact that there is evidence that its user growth is starting to plateau in the wake of product enhancements to similar products like Facebook's WhatsApp Status."

"The big question given Snap’s reliance on this revenue stream is how much Facebook has cannibalised it with the release of its own version."