The $2.2bn first quarter loss included a $750m bonus paid to Evan Spiegel, its 26-year-old founder, for taking Snap public. At the time of its IPO filing, the company did disclose its RSU status in its prospectus.
That was a jump of 286 per cent from a year ago but below Wall Street estimates of around US$158 million, and a significant miss for the fast-moving social media segment.
The company reported 166 million daily active users (DAU). It tries to make money by selling advertising space targeting its main user base, 18- to 34-year-olds, while Snap's main competitors, Facebook and Google, have a much broader range of users, and thus attract many advertisers.
Another factor which could be driving users away from Snapchat, is the fact that Facebook and Instagram have copied numerous features from Snapchat over the past 12 months.
Snap's earnings follow on the heels of Facebook's strong first-quarter results.
Year-on-year growth in users was 36%, slowing from 48% in the fourth quarter and 63% in the third quarter.
Snap reported $149.65 million in revenue for its Q1 of 2017 Wednesday, compared to just $38.8 million for the same quarter past year. The company's chief strategist, Imran Khan, said on the conference call, "We made good progress this quarter improving the performance and quality of our Snapchat application, especially on Android, which has helped result in increased net user adds and engagement".
Snap emphasized on a call with analysts Wednesday that its users were spending more time than ever on Snapchat, as it seeks to convince investors that loyalty to its products matters more than the size of its user base. I use USA and Canada because that's where Snap's target market appears to be.
A Snapchat sign hangs on the facade of the New York Stock Exchange (NYSE) in New York City, on January 23, 2017.
Investors weren't only dismayed by Snap missing on revenue, but also by much slower-than-expected user growth numbers.
For comparison's sake, let's see how other publicly traded companies did in their first earnings report.