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Bloomberg
Snap Inc. so far hasn’t been able to tamp down investor concern about user growth. When asked about a slowdown in new users on its Snapchat photo-sharing mobile app in the fourth quarter, the company blamed a product issue with its Android version, according to investors who attended the company’s initial public offering roadshow presentation in New York.
Investors were skeptical of that answer, especially in light of rising competition from Facebook Inc., whose Instagram app recently launched a clone of Snapchat’s popular stories disappearing-video feature. Instagram’s stories has quickly amassed 150 million daily active users, just below Snapchat’s 158 million.
“Pointing to problems with Android is not addressing the elephant in the room, which is Instagram,†said Sean Stiefel, a portfolio manager at Navy Capital, who attended the presentation. “They sort of danced around the issues with user growth.†How quickly the company is adding new users — and how engaged those users are — will be top of mind for investors as they weigh whether to buy into Snap’s stock at the $16.2 billion to $18.5 billion market valuation it’s targeting. That’s because the 7-year-old company hasn’t given many details on future plans outside of pushing toward profitability in its flagship Snapchat app.
Instagram’s stories, like Snapchat’s, are broadcasts of videos to friends, lasting 24 hours before they disappear. In its presentation, Snap sought to differentiate the two apps, telling investors that people tap Instagram for different reasons than they do Snapchat, which they use for their most intimate friendships.
But if Instagram’s stories feature does prevent Snapchat from building its audience, Snap will need a more significant explanation than Android product problems when it starts to give quarterly earnings presentations after the IPO. Chief Executive Officer Evan Spiegel, wearing a suit, tackled other pressing questions at the lunch event at New York’s Mandarin Oriental hotel.