Snap’s Revenue Growth Hiccup

The New York Stock Exchange. Photo by Bloomberg.

The message from Snap’s executives in the company’s IPO filing is clear: Don’t buy the stock based on Snapchat’s audience size. Focus on the quality of its audience and the revenue it can make from it. But the quarterly revenue growth Snap disclosed Thursday could make it tougher to convince investors its opening share price won’t be wildly expensive.

Snap’s revenue increased 29% from $128 million to $166 million between the third and fourth quarters. That was a significant increase from the fourth quarter of 2015, when the company brought in $33 million. Still, for a company that’s still below $1 billion in annual ad revenue, that quarter-over-quarter increase is relatively low, especially during the holidays, which is the biggest ad-sales period of the year.

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Going forward, the pressure on Snap will be to crank out products that grow its audiences, especially the more valuable ones based in North America, as well as keep them engaged. Without that, Snap will be in the uncomfortable position of asking the public markets for a valuation of a hyper-growth company without actually having the growth.

—Amir Efrati contributed to this article.

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Even by more traditional measures, Snap is asking a lot from public investors.