BUSINESS

Snapchat maker Snap Inc. held the biggest initial public offering ever for a Los Angeles company this week pricing its shares at $17 apiece. The company made its debut on the New York Stock Exchange on Thursday, where it quickly leaped to close at $24.48.

From the filing

Snapchat turns into a broadcast platform in the developing world, and that's bad for business

The launch of Instagram Stories last year coincided with a dip in Snapchat usage. (Instagram)
The launch of Instagram Stories last year coincided with a dip in Snapchat usage. (Instagram)

Facing questions about slowing user growth, Snapchat maker Snap Inc. said it was more susceptible to competition from apps like Instagram in developing countries where cheap Androids outnumber expensive iPhones and high-speed mobile data plans aren't an option.

In a regulatory filing last week, Snap revealed that it didn't add any users outside of North America and Europe during the last three months of 2016 compared with the prior quarter.

On Thursday, the company took a fresh try at explaining what might have happened.

Snap said software bugs had made its Android app difficult to use, the effect of which was felt more starkly in developing countries where iPhones are a rarer sight.

In addition, slower mobile networks limit Snapchat usage to when people are connected to Wi-Fi. That largely turns Snapchat into video-watching app in places outside of North America and Europe. People don't use it as much to upload videos of their own and talk to friends. Losing the communications aspects of Snapchat makes usage more sporadic.

"This consumption-heavy engagement means that a smaller percentage of [daily users] are creating content, which more closely resembles a broadcast model where a few users share content with a broader group of followers," Snap said. "This means that user engagement in these countries is more susceptible to competition by broadcast-oriented platforms."

When Instagram released a feature in August aimed at getting users to sit back and watch videos, it represented more direct competition in the developing world, which might explain why Snapchat struggled to add users in the months after. In those markets, there simply wasn't as much reason to tune into Snapchat as in North America and Europe, where its communications tools are popular.

The new details were among some of the highlights in an amended document filed with the Securities and Exchange Commission. Other new points include:

  • Snap acknowledged a bump in advertising revenue during the third quarter of 2016 because of the Summer Olympics.
  • Snap said it recently granted board member Joanna Coles 52,736 shares of its stock that will vest over the next couple of years. The deal brings her pay in line with other Snap board members.

  • Snap added British bank Connaught and UBS Securities as additional underwriters of its IPO.

Latest updates

Copyright © 2017, Los Angeles Times
EDITION: California | U.S. & World
67°