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After a trio of clunkers over the past year, Snap Inc. finally turned in an impressive quarterly earnings report Tuesday, beating expectations for revenue and user growth for the first time as a public company.
Wall Street reacted by sending Snap's stock price soaring in after-hours trading, up by more than 20%. The company’s stock chart Tuesday afternoon looked similar to the trajectory of Elon Musk’s SpaceX rocket, launched into outer space just minutes before Snap reported: straight up.
Snap made $285.7 million in revenue in the fourth quarter of 2017, beating analyst estimates of $253 million. It also added 8.9 million users, beating expectations of 6 million.
“Our work during 2017 is proof that we aren’t afraid to make big changes for the long-term success of our business,” Snap CEO Evan Spiegel said in a release.
The positive earnings report is a bright spot amid a year of tough moments for Snap, which has spent much of its time on the public markets trading below its IPO price. Expectations set in part by its own pre-IPO marketing efforts have proven difficult to meet. The company has struggled to grow Snapchat's revenue and user base at the pace many anticipated, leading to a series of sell ratings from Wall Street analysts.
Snap is currently locked in a fight for its life with Facebook, which copied its marquee Stories feature — and the accompanying selfie filters and masks — and inserted them into all of its major products: Facebook, Instagram, WhatsApp, and Messenger.
In Facebook’s earnings call last week, Facebook CEO Mark Zuckerberg called WhatsApp and Instagram the two most-used Stories products in the world and said, “Stories are on track to overtake posts in Feed as the most common way that people share across all social apps.”
To head off this assault, Snap needs to grow. The more people it can get to use its app, the more enticing it becomes to its advertising customers, who need to reach a wide audience for their campaigns to be effective. Snap's new 8.9 million users will help, but the company will need to keep up the pace in order to thrive.
The silver lining in a difficult 12-month period for Snap is that it continues to grow both users and revenue despite Facebook's ruthless attempts to demolish it. Facebook’s copies have certainly hurt the company, but they have not killed it yet. The little yellow app is showing some resilience.