Snap is in Even More Trouble than Twitter
posted Sunday Aug 13, 2017 by Scott Ertz
Snap Inc., the company that produces Snapchat, has not been public very long, but it has had a difficult journey thus far. Their second quarterly report was released this week, and the results did not make anyone happy. The company has fallen victim to some of the same issues as other struggling social platforms, and has overcome others.
One issue that Twitter has faced is user growth, or lack thereof. While Twitter gained a total of zero active users in the last quarter, Snap experienced a 4% growth over last quarter. Snap now has 173 million active users, while Twitter is stalled at 328 million. The user growth is particularly impressive, considering that Snapchat has no unique features at this point. The product's primary feature has been duplicated wholesale by Instagram, leaving little reason for new users to join Snapchat.
Active users isn't the only thing that Snap has managed to grow in the last quarter. The company has seen a 153% increase in revenue, landing at $181 million for the quarter. Unfortunately for the company, revenue is not profit, and profit is not something the company has figured out. In fact, expenses have grown exorbitantly, taking corporate losses almost four times over last quarter, to $443 million. Losses of that amount are a great way to burn free cash flow, but not a great way to keep the lights on in the long-term. If you need a litmus test, ask SoundCloud how it's worked.
Investors showed a lack of confidence in the company, with stock prices dropping 11 percent following the report. That drop was on top of consistently falling stock prices, which have the stock well below IPO range, which is quickly approaching 1/3 of the initial offering.
