Evan Spiegel talks about dealing with copycats as Snapchat shares plummeted

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Snapchat CEO Evan Spiegel attends the first day of the annual Allen and Co. media conference in Sun Valley, Idaho, July 8, 2015.
Snapchat CEO Evan Spiegel attends the first day of the annual Allen and Co. media conference in Sun Valley, Idaho, July 8, 2015. Reuters/Mike Blake

In its first earnings report as a public company, the Snapchat owner has reported a slower user growth and revenue. Snap Inc shares plummeted on Wednesday, missing some Wall Street estimates as it competes with other messaging apps.

Reuters reported that Snapchat shares dropped 23 percent in after-hours trading. The drop is a reversal for the company following its initial public offering in March, which has been the biggest for a tech company in the United States since Facebook Inc's debut in 2012.

BTIG analyst Richard Greenfield said some investors hoped to be surprised with huge numbers in Snap’s first quarterly report. He added that failing to live up expectations, let alone exceed them, caused disappointment.

But Snap Chief Executive Evan Spiegel was quick to reassure investors. In an earnings call, he addressed concerns about dealing with copycats, along with other questions.

"If you want to be a creative company, you've got to get comfortable with and enjoy the fact that people are going to copy your product if you make great stuff," Spiegel said. He even made a comparison to popular search engines, saying just because Yahoo has a search box does not mean it is Google.

The future of Snaps

Greenfield said the future of Snapchat is on Spiegel and his team as they are expected to build products that delight people. The analyst believes that only time will tell if that is possible.

DJ Kang, head of Asia for consumer research firm ValuePenguin, said Snapchat stock is overvalued primarily due to the persistent threat from Facebook and Instagram, forecasting that it is possible that Snapchat could even report a decline in users from the fourth quarter. Snap chalked up the drop to a technical issue with Android users in Q4, which it says was fixed in Q1.

Marketing software firm Crowdtap CEO Matt Britton said several celebrities are migrating to Instagram from Snapchat. This means advertisers are likely to follow. Britton believes Snapchat must innovate to find new ways to compete more effectively with Instagram. He said the company's augmented reality Spectacles can be its edge in the competition, CNN reports.

Snapchat was launched in 2012 as a mobile app that allows users to send snaps that disappear within seconds. Last year, the company was rebranded as Snap Inc and moved into the hardware space with Spectacles, colourful sunglasses that record short clips to post on Snapchat.

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