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Snapchat Has a Growth Problem

Its user growth is slowing dramatically.
Image via Flickr user Global Panorama

Snap Inc., the company formerly known as Snapchat, has filed to go public. It's the first major U.S. consumer software company of its kind to go public since Twitter in 2013, and both Wall Street and Silicon Valley are paying close attention to how it unfolds.

According to Snap's SEC filing, the company has succeeded at attracting a lot of young users who spend a lot of time on the app. That's not news, but the documents also reveal Snapchat's biggest problem: Its user growth is slowing dramatically.

Snap added 5 million new users between the third and fourth quarters of 2016, which is about 3 percent quarter-to-quarter growth. Though Facebook had a similar growth rate just before going public in 2012, its user base was much larger: Facebook had 483 million daily active users worldwide the quarter before it went public, whereas Snapchat now has 158 million.

Though Snap and CEO Evan Spiegel insist the company isn't a social network, media company, or messaging application (the IPO filing says Snap is a "camera" company), Snap expects to ramp up its ad revenue over the next few years. But as Bloomberg's Shira Ovide points out, the trouble is that Snap is now spending more money renting server capacity from Google than it's generating in revenue, which makes it "unique in this regard compared with other internet companies."

Read the rest over at VICE Money.