As Facebook Inc. (FB) has launched one Snapchat service clone after another, a lot of the negative press surrounding Snap Inc. (SNAP) has revolved around the impact of Facebook's clones -- Instagram Stories especially -- on Snapchat's user growth. Arguably not getting enough attention along the way: The impact of Facebook's dominant position in social media advertising is weighing on Snap's revenue growth the same way it has already weighed on Twitter Inc.'s.
Snap's Q2 numbers and somewhat cautious Q3 commentary show that Facebook's continued ad dominance is making the aggressive sales forecasts of many analysts look questionable. Especially with user growth proving a little underwhelming amid Facebook's onslaught.
Snap reported Q2 revenue of $181.7 million (up 153% annually) and adjusted EPS of negative $0.16, missing consensus analyst estimates of $186.2 million and negative $0.15. On a GAAP basis, EPS was negative $0.36, missing a negative $0.30 consensus.
The closely watched daily active user (DAU) count rose by 7 million sequentially and 30 million annually to 173 million, falling slightly short of a 174.6 million consensus. For comparison, two of Facebook's Snapchat Stories clones, Instagram Stories and WhatsApp Status, have now topped 250 million DAUs.
Shares fell 16.7% in after-hours trading to $11.47, and have made new post-IPO lows.
In addition to the Q2 sales miss, Snap's attempts to temper expectations for Q3 (a seasonally stronger ad quarter) aren't going over well. While discussing Q3 on the earnings call, CFO Drew Vollero made a point of noting that sales rose by $39 million sequentially in Q3 last year, rather than the reported $57 million, if one backs out the impact of the Summer Olympics and election-related spending. That's heightening fears that a pre-earnings Q3 revenue consensus of $271.6 million -- it implies sequential growth of $90 million, or 49% -- was too optimistic.
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