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Nov 8, 2017

China’s Tencent Snaps Up Shares of Snapchat

By Jeremy Quittner

China’s Tencent swooped in and purchased an additional 12% of Snap.

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Snap is hoping to gain back some of its crackle and pop.

The company that owns the disappearing social media app Snapchat failed to meet analyst expectations in the third quarter, and investors were not pleased.

On Tuesday Snap’s shares fell 20% as it reported increased losses, and revenue that was weaker than analysts expected. The company revealed  its quarterly losses more than tripled to $443 million. Revenue was up 62% to $208 million–analysts had expected $237 million, according to the Wall Street Journal.

Snapchat gained only 5 million new users in the quarter, reportedly its lowest user growth since the company was founded in 2011.

The vanishing messaging and video app site was once the darling of Wall Street. It went public this winter to great fanfare, raising a staggering $3.4 billion in one of the biggest public offerings in years. But it’s encountered difficulties since listing on the New York Stock Exchange in March.

Snapchat gained only 5 million new users in the quarter, reportedly its lowest user growth since the company was founded in 2011.

Analysts speculate it’s facing problems competing for advertising dollars in an environment dominated by tech heavyweights Google and Facebook. In recent months Snap has also had at least one expensive dud–video recording glasses called Spectacles, which cost the company $40 million in the quarter due to lack of sales.

TenCent snaps up more Snap

China’s Tencent, the Internet services giant, swooped in and purchased an additional 12% of the company in after hours trading.

Tencent is one of the top tech companies in China, and ranks globally. It owns the WeChat messaging app which boasts nearly 1 billion users, as well as social networks Moments, Mobile QQ, QQ and Q-Zone.

Tencent is also a global leader in online gaming. It owns Riot Games and Supercell.

Tencent, an early investor in Snapchat, has frequently purchased stakes in other startups, including Tesla and Lyft.

Facebook and Twitter going strong

The past week has been a big one for social media companies as they’ve reported their third quarter earnings.

Older companies including Facebook and Twitter showed strong revenue growth, while Twitter announced an important change to the way users communicate on its platform.

More space to Tweet

Twitter expanded the limit for tweets to 280 characters, double what it’s been since launching in 2006. The social media platform is making changes to retain and gain more customers, particularly those who might feel constrained by the older character limits.

Twitter released this graphic to explain things a bit better:


Source: Twitter

One interesting note: Users in China, Japan and Korea aren’t getting the extra space, as they have no problem with brevity, according to Twitter.

Twitter also added four million new users, and saw its revenue increase about 3% to $590 million, compared to the previous quarter, according to its quarterly report.

Great big revenue growth

Facebook reported sales growth that was off the charts. It took in revenue of $10.3 billion in the third quarter, up a whopping 47% compared to the same quarter a year ago. That beat what analysts had expected for the company by nearly 5%.

Shares of Facebook reportedly fell about 2%, following the news, as the company also said its operational expenses would increase by 45% in the coming year.

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    These earnings came in spite of recent rocky times for the global social media platform. Facebook representatives testified before Congress last week about the role the company played allowing Russian operatives to plant false campaign information in highly targeted ads on the social media platform during the 2016 election cycle in the U.S.

    Mark Zuckerberg, the company founder, addressed the controversy in a conference call with financial analysts last week.

    “We’re working with Congress on legislation to make advertising more transparent,” Zuckerberg said. “We’re also working with other tech companies to help identify and respond to new threats, because as we’ve now seen, if there’s a national security threat involving the internet, it will affect many of the major tech companies.”

    Jeremy Quittner is the editorial director for Stash.


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