Not even the dancing hot dog can cheer up Snap’s cranky investors. Only a few minutes into Snap’s earnings call Thursday, Evan Spiegel mentioned the popular hot-dog filter his company introduced last month, saying it may be “the world’s first augmented reality superstar.”

But it was too late. Even a beloved luminary like the breakdancing hot dog couldn’t undo the gloom that had already settled on Snap’s earnings report, which missed revenue and net loss estimates only slightly but seemed to lead to another wave of disillusionment around the social media company.

Snap’s stock fell as much as 17 percent to $11.40 a share in after-hours trading after the company said revenue rose 153 percent to $182 million and net profit nearly quadrupled to $443 million, or 16 cents a share. Analysts had been expecting $186 million in revenue and a net loss of 14 cents a share. At its low point, Snap was trading 33 percent below its March IPO offering price.

Snap has proven proficient at rolling out innovative features, such as amusing filters or Snap Map, which uses a map interface to locate snaps from one’s friends or those shared publicly around the world. But the metrics the company shared on both user activity and its ability to monetize those users show Snap is still battling its way up a hill where Facebook and Instagram are already standing.


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Average daily users grew 21 percent to 173 million in the second quarter, below the 175 million that analysts polled by Factset had forecast. Average revenue per user more than doubled to $1.05 — also below the $1.07 figure that analysts were looking for.

Again, these shortfalls are hardly evidence Snap is troubled. Rather, they show it’s taking longer for the company to deliver on the user engagement and revenue generation investors were hoping for when it went public. But because Facebook has been so quick to copy Snapchat features in Instagram, more time isn’t a luxury Snap can necessarily afford. (For context, Instagram has 700 million DAU and the Instagram Stories feature has more than 250 million.)

After a rocky earnings report in the first quarter, the pressure was on Snap and Spiegel to turn things around in the second quarter. While Spiegel and other Snap executives spoke repeatedly about the company’s progress luring in big advertisers with features such as self-service ads, the absence of guidance that could buttress that optimism with Snap’s estimates added to the uncertainty around its future.

Also adding to the uncertainty were signals that Snap was focusing on controlling costs rather than expanding its user base outside of North America and Europe. Headcount in the second quarter grew 10 percent to 2,600, down from the 27 percent growth rate in the previous quarter. Snap indicated that the pace of hiring could remain slower in the current quarter.

Spiegel said that he and cofounder Bobby Murphy wouldn’t sell any of their shares in Snap this year, saying they still believe in the company’s long-term success. “Snap is one of six platforms with over 150 daily active users outside of China. The other five are platforms run by two companies with huge market caps,” he said. “We’ve historically been able to do business in markets that are highly competitive and saturated by our competitors.”

Snap is taking small steps toward that long-term potential — for example, it posted a gross profit for the first time since it first filed to go public. But it’s still spending nearly $3.50 for every revenue of dollar it brings in.

Bottom line is that Snap still has a long way to go. And investors are starting to wonder if it has enough time to get there.

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