Snapchat's rapid growth rate is disappearing

Even a dancing hot dog can't get people excited about Snapchat again.

On Thursday, Snap, the company behind the social network, said Snapchat gained 7 million daily active users over the past three months, a modest rise from the total 166 million daily active users Snap mentioned in its earnings report in May. Though any rise is good, the 173 million total users still doesn't surpass the 250 million daily active users of Instagram Stories, which celebrated its first birthday last Wednesday.

The results underscore the heat Snapchat is feeling from copycat features offered by Facebook and Instagram. Instagram Stories, in particular, has essentially flattened Snapchat's meteoric rise, while looking exactly like the social network. In an anniversary post, Instagram listed Puppy Ears as its most popular face filter -- you know, exactly like the filter that helped make Snapchat so popular. 

The results also indicate that Snapchat's growth is slowing. In May, Snap said 8 million more people were using its app each day.

Meanwhile, Snap still isn't profitable. The company reported a loss of 16 cents a share, excluding some items, compared with average analyst expectations of 15 cents a share, according to Yahoo Finance. 

Revenue more than doubled, to $181 million, though it was still below analysts expectations of $186 million. The company reported a loss of $443 million this quarter, quadrupling from the $115 million net loss last June. 

The majority of that loss is still from stock-based compensation, which resulted in a $2.2 billion loss last quarter.

Snap is trying to turn things around. It added multiple new features for users, like Snap Maps, links, and background filters, which founder Evan Spiegel has said would be its best strategy for overcoming imitators. Snapchat even found another hit on its hands, with its dancing hot dog filter, but it hasn't been enough, despite being viewed more than 1.5 billion times. 

"Our dancing hot dog is most likely the world's first augmented reality superstar," Spiegel said.

Shares closed up less than 1 percent, to $13.77, but fell nearly 12 percent in after-hours trading following the earnings release. Snap's shares have lost half their value from their IPO, and are down from the $17.73 closing price on its first quarterly earnings report.

As for Snap as a "camera company," that model hasn't worked for them either, as only 0.05 percent of its users actually own the Spectacles. It didn't get much better in the second quarter, with the company only earning $5.4 million from their camera-sunglasses hybrid, that's down from $8 million sold in the first quarter.

That means that only 41,000 people bought Spectacles, or about 0.02 percent of Snapchat's users.  

Spiegel told investors during a conference call that he and Bobby Murphy, Snapchat's co-founder, wouldn't be selling any of his shares this year.

"We believe deeply in the long-term success of Snap," Spiegel said.

Update, 3:17 p.m. PT: To add comments from Snapchat executives. 

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