Snapchat parent Snap continues to struggle under the shadow of Facebook, which has wasted no time eating into Snap’s user base and ad revenue with copycat products. In its second-ever quarterly earnings, Snap needed to prove that it can outlast and grow despite Facebook. The outlook doesn’t look good. Here’s what you need to know from Snap’s second earnings report:

The key numbers:

  • 173 million daily users (+7 million from previous quarter)
  • $182 million in quarterly revenue (+$32 million)
  • $1.05 average revenue per user (+15 cents)
  • $5.4 million in Spectacles or “other” revenues (-$2.9 million)
  • 42,000: the number of Spectacles sold
  • +30 percent: how much Discover publisher story views have grown
  • 60 percent of Snap Ad impressions are now delivered programmatically
  • 20: the number of snaps an average daily user creates every day

What Wall Street was hoping for:
It’s no secret that Wall Street is pretty bearish on Snap these days, with the company’s stock plummeting since its first-quarter earnings report to an all-time low — which is now more than 40 percent below its opening IPO price. What analysts want to see is enough growth, in both daily users and ad revenue, to signal that Snap can survive Facebook copying its products.

Snap was expected to end the second quarter with roughly 174 million daily active users, with revenue coming in at $186 million, according to CNBC. It missed on both accounts — and its stock is tanking even more.

The Facebook effect in one tweet:

More money from the same users:
Snapchat isn’t adding daily users at a clip that satisfies Wall Street. Since its IPO, the company has tried to convince investors that daily users is the wrong way to measure whether Snap can be a successful company. Instead, Snap has argued, the focus should be on how much money the company can make from existing users. At the end of the first quarter, Snap was earning 90 cents per user, which grew to $1.05 cents per user in the second quarter.

The trouble is, tech companies have already trained Wall Street to assess success by reach metrics — specifically daily and monthly active users. By these measures, Snap is failing, and with Instagram Stories continuing to add users and advertisers, it’s not a good time to be a Snap investor.

Monday is an important date:
That’s when current employees, who have been unable to sell Snap stock since the IPO due to a 150-day “lock-up” period for employees and early investors, will be allowed to start selling Snap stock for the first time. What these employees do will be a good indication of the morale inside the company, no matter how Snap’s top execs try and spin it. (Snap CEO Evan Spiegel said he and co-founder Bobby Murphy will not sell any shares this year.)

Snapchat gives publishers some love:
Snap highlighted Discover partners including Vertical Networks, CNN and Bleacher Report. For Vertical Networks, Spiegel noted how its show, “Phone Swap,” averaged more than 10 million viewers per episode — the success of which has led to Vertical Networks taking that show to linear TV. CNN and Bleacher Report also received a shoutout, as the publishers’ Discover channels are now reaching 12 million and 16 million monthly viewers, respectively. It seems like Snapchat is beginning to talk up the reach and quality of its Discover section — something that Instagram has not copied yet.

There might be some good news:
While Snapchat user growth pretty much stalled in the first half of 2016, there are signs that the app is adding users. There was a 12 percent bump in daily active users from June to July, with August tracking even higher, according to global iOS and Android tracking from app analytics firm Apptopia.

Spiegel also said that more than half of ad impressions on Snapchat in the second quarter came through the company’s self-service ad platform and ads API.

WPP CEO Martin Sorrell said the agency will double its ad spend on Snapchat this year, to the tune of $200 million. At this rate, though, Snap might need a few hundred million dollars more.

The knives are out:

 

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