Snapchat reported its first quarter of 2018 earnings yesterday after the market closed, and it was not a great quarter for the company. It met analyst expectations on EPS or Earnings Per Share, which was a loss of $0.17. But it did miss on revenue, posting revenues of $230.7 million versus the $244.5 million expected by analysts. The actual numbers weren’t too bad, but the guidance for the rest of the year was dismal for the struggling social media platform. Stating that its next quarter year-over-year revenue growth rate will “decelerate substantially”, compared to this quarter. Basically that means that there is going to be more hard times ahead for the company.
The company said on its earning call after it reported earnings on Tuesday, that the big factor in the revenue decrease would be over lower ad prices. Snapchat’s ads had already decreased 65-percent year-over-year in the first quarter. These ads are those outside of Story ads. This decrease was mostly due to the company switching to an automated “programmatic” auction system, instead of direct sales. Which should save Snapchat some money, but it is also resulting in lower prices on ads. This should straighten out over the next few quarters, as Snapchat brings in more advertisers.
However, the bigger issue for Snapchat is its design. It flopped as many had expected. The redesign that Snapchat began rolling out shortly after reporting its Q4 earnings for 2017, back in February, had received a ton of criticism, even from celebrities. In fact, some celebrities criticized it publicly, which made Snapchat’s stock drop by double-digits last month. Snapchat reported 191 million daily active users, which was lower than analysts expectations of 194.2 million. Snapchat did add more active users, however, as last quarter it reported 187 million daily active users. While Snapchat is having some growing pains right now, and its stock has dropped 20-percent bringing it to its all-time lowest, it does have a bright future, if it can get things right. And that includes gaining more advertisers, and users.