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Snapchat co-founders lose $2 billion after poor Q1

19 May 2017

The photo sharing app only saw a 5% rise in terms of users, up to 166 million since the last three months of 2016.

Shares in Snap plunged 24 per cent in after-hours trade to US$17.45 following the results.

Evan Spiegel, Snap's secretive 26-year-old CEO, told analysts on a conference call that he thinks about user growth "through the lens of creativity".

"People are going to copy your product if you build great stuff", Spiegel said.

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The vague response did little to ease Snap's nosediving stock. The company, founded in 2011, lost more than $500 million a year ago on revenue of about $400 million, it disclosed in regulatory filings.

Year-on-year growth in users was 36%, slowing from 48% in the fourth quarter and 63% in the third quarter.

In an interview with CNBC, Snap's chief strategist Imran Khan said, "We made good progress this quarter improving the performance and quality of our Snapchat application, especially on Android, which has helped result in increased net user adds and engagement".

Since the Snap IPO, Facebook has been very aggressive about copying Snapchat. While the company's finances are less than stellar, the good news is that Snapchat's user base has grown a tremendous amount in just the a year ago. "Just because of Yahoo! has a search box doesn't mean they're Google".

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Just two months into its life as a public company, Snap is struggling.

The social network argued during its earnings call that numerous teenage users it has can't be reached by traditional television or print advertising, according to the Verge.

The question has been whether Snap can quickly grow its user base and, in time, turn a profit.

Snap shares got destroyed in the aftermath of the social network's first earnings report, likely hitting younger investors the most, according to data from Wall Street brokers.

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Shares in Twitter (NYSE:TWTR) and Facebook also slid after they posted debut scorecards. Unfortunately, it wasn't enough to prevent investors from making a run for it. Twitter was hurt by concerns about slowing user growth (sound familiar?).