Snapchat’s lackluster ad revenue has investors worried

Snapchat, maker of a free mobile app that lets users send videos and messages that disappear in seconds, is struggling to gain traction with advertisers, fuelling investor concern that its $16 billion valuation isn’t justified by a business that hasn’t yet shown it has a steady source of income. Even in a world where upwards of 140 private companies are reckoned to be worth $1 billion or more, Snapchat’s outsized value stands out. Fidelity Investments’ decision to slash the estimated value of its Snapchat stake by 25 percent in the third quarter exacerbated concern about the company’s ability to meet advertisers’ expectations. For Snapchat advertisers, the question is whether prices that can reach more than $500,000 for some ads is worth it when the company lags competitors in targeting specific consumers and measuring how ads perform. “If Snapchat doesn’t get that figured out, they’re in trouble,” said Nick Godfrey, chief operating officer at RAIN, a digital strategy agency.