Three things we learned from Snap’s no good, very bad week

You can’t put a fun face filter on this one: Snap simply had a bad week.

The company behind Snapchat reported earnings for the first time on Wednesday and the numbers sent its stock down more than 23 percent. Snap stock rallied a bit on Friday to finish the week down 17 percent from where it opened on Wednesday morning.

Before Snap’s earnings call, we asked three questions we thought were important about Snap’s business. Now that the dust has settled, let’s take a look at the answers we got.

Short Answer: Yes.

Long Answer: Snapchat grew by eight million daily users in the first three months of 2017, which means it grew 36 percent over the past year. That doesn’t sound too bad on the surface, but the trends show that Snapchat’s growth is slowing down rather quickly. Just six months earlier, Snap was growing at a 63 percent clip. When Snapchat filed for an IPO in February, it was clear that user growth started to slow in the back half of 2016, but Snap told people it was primarily due to a technical issues it was dealing with on Android. Those issues have been fixed, and growth was nowhere near the growth Snapchat had in the first half of 2016. Investors are already concerned that Snapchat is looking more like Twitter than like Facebook, and the company did nothing to assuage those concerns this week.

Short answer: Yes, kinda.

Long answer: Snap believes its business can grow without adding a ton of new users, making more money instead from existing users who are valuable because they’re young and live in major advertising markets, like North America and Western Europe. A good way to measure this strategy: ARPU, or average revenue per user. In Q1, Snap made 90 cents per user, up almost three times what it made a year ago. But ARPU was down from Q4. It’s not uncommon for advertising businesses to have a drop in revenue from Q4 to Q1 — marketers’ ad budgets usually shrink following the holiday season. (Those in the industry call this “seasonality.”)

But Ben Thompson, who writes a very insightful tech and media newsletter called Stratechery, pointed out this week that seasonality shouldn’t be impacting Snap’s business just two years in. Facebook and Twitter, for example, didn’t experience seasonality until four years after monetizing. “If it has the ‘great advertising business’ that [Snap Chief Strategy officer Imran] Khan claims then growth should easily overcome seasonality,” Thompson argued. Good point.

Short answer: It didn’t go well.

Long answer: Snapchat CEO Evan Spiegel is extremely confident, which works well when things are going well. But that confidence came through on Wednesday’s earnings call in a way that few appreciated. When Spiegel was asked if he was concerned about Facebook, which is trying to copy many of Snapchat’s features, he chuckled and then likened Facebook to Yahoo. He also declined to share any insights into Snap’s product roadmap or provide any concrete plans for future user growth.

It was a showing that left CNBC’s Jim Cramer quite literally jumping out of his seat in frustration later in the week. “This guy is so arrogant,” Cramer yelled. On top of that, Snap never issued guidance for the quarter, then fell short of analysts’ revenue expectations. Properly setting those expectations will be key moving forward (though the company declined to issue guidance again for next quarter).

To sum it all up, this was a tough week for Snap. But startups have tough weeks. Facebook stock sat below its IPO price for an entire year after it went public. Lots of people see potential with Snapchat, which is why the company has a market cap above $17 billion. But this week will be one the company wants to disappear. Quickly.

This article originally appeared on Recode.net.