Snapchat faces harsh reality check after earnings report

Snapchat’s ambition to become the next big social media platform hit a brutal reality check with the first earnings report from parent company Snap.

The US$2.2 billion loss reported earlier this month for the first quarter along with weaker-than-expected revenue and sluggish user growth prompted a wave of selling and harsh comments from analysts about the firm known for its disappearing messages.

Snap said the number of daily active users grew to 166 million at the end of the quarter, a 36 per cent increase from a year ago but just five per cent higher than at the end of 2016.

“The conclusion from all of this is that Snap’s future is that of a niche company dominating narrow segments of the population rather than a company with broad mass market appeal, and that has significant implications for its valuation,” Jan Dawson of Jackdaw Research said in a blog post.

Richard Windsor, an analyst who writes the Radio Free Mobile blog, said Snap’s growth “is not nearly good enough” given its lofty valuation.