Why Snap May Continue to Disappoint Investors for Now

Snap's (NYSE: SNAP) troubles growing its daily active user count have been a big focus of investors ever since the company made its initial filing to go public. The biggest reason for the slowdown seems to be the launch of Instagram Stories, a feature the Facebook (NASDAQ: FB) subsidiary blatantly copied from Snapchat. But most investors understand that storyline well, and Wall Street analysts have had months to bake the user trends into their forward-looking estimates.

Analysts bullish on Snap have a positive outlook because they believe the company will be able to rapidly increase the average revenue per user, or ARPU, on the platform. There are a couple of major factors that contribute to that -- ad impressions per user, and average price per ad. The former is largely dictated by Snap, which manages ad supply to maintain a good user experience in the app. It's also affected by user engagement -- the longer people spend in the app, the more opportunities they have to see ads.

Average ad price is now largely dictated by the market's demand for Snap Ads. And, unfortunately for Snap investors, the market hasn't been too kind so far.

Source: Fool.com