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Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

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Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#61

Post by raiyu »

Looking at their most recent quarter (Q3) growth has slowed down to 80% YoY.

YTD revenue: $538MM

Q4 should be their best quarter but look at last year we see that Q3 was $128MM, followed by $165MM in Q4 and then $149MM in Q1. Using Q3 as a proxy with $208MM that would imply around $265–270MM in Q4.

Taking even the higher range at $270MM that would mean full 2017 year revenue: $808MM

With revenue growth slowing, user acquisition slowing, and monetization on a per user basis only increasing around 15–20% per quarter that would imply a difficult and challenging 2018.

Most likely full year revenue growth will be around 60% on the high end implying:

2018 full year revenue: $1,292MM

Keep in mind that losses are also growing this entire period so they are treading into Twitter territory of slowing growth and increasing costs.

Taking an 8x revenue multiple on next year’s revenue that would imply a value of: $10.3B today.

However, by Q1 2018 earnings reality will set in. Either Snap will be able to reinvigorate their growth, or with full year 2018 revenue projections it will be quite clear that people are continuing to pay a significant premium for future revenue that is quite possibly 2–4 years ahead of where the company is today.

What's important to understand is that Facebook as a platform is designed for advertising. It's an entertainment platform, people are wasting time so ads fill into that gap nicely and FB has been tweaking everything from how your news feed operates to forcing brands to pay to reach their followers all geared towards increasing revenue.

Twitter is also a good platform for advertising but again look at the frequency of ads that you see, notice that they don't charge to reach followers, and so forth.

Snap is in a worse position because primarily it's a messaging platform which doesn't lend itself well to ads and video ads always under perform because there isn't as much of a driver to interact like click through text or visual ads.

Snap will not get their growth rate next year will decrease, the only question is how much.

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#63

Post by dboreham »

noncoml wrote: post #39
exogeny wrote: post #30

Snap suffers from a fundamental paradox, one that is difficult for me to imagine an easy way to solve. They've made their bones by being a uniquely fun and social way of a certain subset of the population to share their lives without parents dipping their head in and seeing what they're doing, ala Facebook. The UI is designed to generally support this; it is confusing and messy and understandable only by someone who…

> how to sell ads Why are we so obsessed with the ads model. Why not start charging? This is not a web app, where you have to take out your wallet and enter your CC info; all it takes is the scan of your fingerprint. I am sure people wouldn't mind paying a certain amount per year to keep using the app without creepy apps. Sure, the revenue will be capped by the amount per year a user is willing to pay, but maybe the…

Humans really don’t like to pay for stuff.

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#64

Post by code4tee »

People need to separate the product from the company. The product may be great, hot with the kids, whatever but at the end of the day Snap is a business.

Snap the company is in terrible shape and poorly run. Their last financials were, in a word, horrifying.

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#65

Post by niftich »

exogeny wrote: post #30

Snap suffers from a fundamental paradox, one that is difficult for me to imagine an easy way to solve. They've made their bones by being a uniquely fun and social way of a certain subset of the population to share their lives without parents dipping their head in and seeing what they're doing, ala Facebook. The UI is designed to generally support this; it is confusing and messy and understandable only by someone who…

It's not about the size of the userbase; it's about business models. They burned cash to acquire users, but once they wanted income they too have gone the advertising route. This leads to the dilution of the core experience as you've pointed out: fudged timelines [1], denser advertising, backporting of missing social networking features, leading to networks that are largely interchangeable [2].

Snapchat can't really afford to be interchangeable with Instagram, because Facebook actually knows how to persuade advertisers to keep selling ads, while Snapchat just relies on its perceived clout among a coveted demographic, providing very few mechanisms for advertisers to gauge their ROI [3]. Sooner or later, advertisers will wisen up and pull out of Snapchat, making their business model crisis all the more acute.

Snapchat is one of the best-positioned companies to actually trial different business models for their app: they have a respectable install base, their platform is still sticky and desirable enough to maintain a sizeable userbase for some time, and their preexisting userbase is aging into being able to spend some money. Defection to Instagram isn't nearly as much of a threat as many make it seem: most Snapchat users are already on Instagram as well, so as long as they continue to engage with Snapchat, all is not lost.

Their map purchase was an effort to pivot the product's monetization back to hyperlocal factors, and solidify the idea that your Snapchat friends are part of your close-knit circle. Snapchat could be a better Foursquare, but it's not quite there yet.

[1] https://news.ycombinator.com/item?id=12191435 [2] https://news.ycombinator.com/item?id=13168804 [3] https://news.ycombinator.com/item?id=15050410

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#66

Post by askafriend »

ptero wrote: post #45
cft wrote: post #36

That means that FB was probably the last "web" or "app" big IPO. Now it's Amazon, Google or Facebook. Even Yelp is withering. Just like it has been impossible to start a new car or airliner manufacturer since the 1920s (except for Tesla), the opportunity for creating new large web companies has been shut by the entrenched trio.

I do not think it is shut, but new entrants must offer something significantly better (or new and useful) than what is available from big 3. I am not sure what exactly Snaps value was beyond some funny face transforms. If nothing, it is not surprising if it fails once the novelty wears off.

I think Nextdoor has a real opportunity here in offering something very differentiated and useful (to varying degrees, depending on neighborhood).

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#67

Post by KaoruAoiShiho »

nikcub wrote: post #43
KaoruAoiShiho wrote: post #22

I just went long on snap after saying for years it's a shitty facebook and if you like social media or online ads then you should just invest in facebook. The latest conference call was very enlightening in that it showed me how much snapchat was doing wrong and what they can do to fix it. I think there's a real opportunity here. It's one thing if snap just can't outcompete facebook, and a whole other thing if the pr…

I'm also very optimistic about Snap - it's one of the only social networks I use regularly. That said, Snap could fix a lot of things and grow revenue and the stock could still not move - they're at about the same market cap of Twitter with a fraction of the revenue and user growth that is similarly stalling There seems to be a hard boundary with reaching the demographic of users in developed nations and both Snap an…

> There seems to be a hard boundary with reaching the demographic of users in developed nations and both Snap and Twitter are there

I think Twitter and snap are very different. Snap is a messenger app and has the same potential as FB messenger or wechat. Twitter will never be that. The latest news has Tencent making a strategic investment and bringing chinese style monetization to Snapchat. I'm very optimistic about this.

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#68

Post by KaoruAoiShiho »

exogeny wrote: post #24
KaoruAoiShiho wrote: post #22

I just went long on snap after saying for years it's a shitty facebook and if you like social media or online ads then you should just invest in facebook. The latest conference call was very enlightening in that it showed me how much snapchat was doing wrong and what they can do to fix it. I think there's a real opportunity here. It's one thing if snap just can't outcompete facebook, and a whole other thing if the pr…

I wish you well on your speculation. I didn't dig into the financials all that much, or even listen to call so I'm approaching this from a place of ignorance, but I do happen to have five or six family members between the ages of 13 and 18 and all of them have unanimously reported to me that Snapchat is unequivocally over. That's as anecdotal as it gets, but I'm also hard pressed to believe that they're all simultane…

Do your family have private or public Insta profiles? My understanding is that the usecase is not perfectly the same. Insta is "halfway" between snap and twitter, though I'm sure Zuck would like it to be "both".

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#69

Post by chuckdries »

niftich wrote: post #65
exogeny wrote: post #30

Snap suffers from a fundamental paradox, one that is difficult for me to imagine an easy way to solve. They've made their bones by being a uniquely fun and social way of a certain subset of the population to share their lives without parents dipping their head in and seeing what they're doing, ala Facebook. The UI is designed to generally support this; it is confusing and messy and understandable only by someone who…

It's not about the size of the userbase; it's about business models. They burned cash to acquire users, but once they wanted income they too have gone the advertising route. This leads to the dilution of the core experience as you've pointed out: fudged timelines [1], denser advertising, backporting of missing social networking features, leading to networks that are largely interchangeable [2]. Snapchat can't really…

As a heavy snapchat user, I'm a big fan of the idea of snapchat as a better foursquare/find my friends because honestly neither application ever made enough sense to keep installed longer than a week at a time.

I don't know if I'd pay for it, but if they wanted to use location to sell ads to local businesses or whatever they could probably tap an otherwise relatively untapped ad market.

Re: Snap’s Rise and Fall: How a Big, Splashy IPO Prompted the Doubters to Keep Mum

#70

Post by LiweiZ »

I only used SnapChat a few times. From what I saw, it is a virtual message channel to make funny/silly face style communication with others, which is what many 10-19 yo need. And I actually did a simple analysis to explore some fundamental needs for that age group based on where their activities happens. And the communication method SnapChat and similar services offer fit what they want perfectly when being used as a massager. As long as they can hold that ground tight, they still have chances.

Also, Tencent just acquired some portion of SnapChat's equities. It has very strong and long track record and experience to make a lot of money from that age group, though in a different culture settings. It might be a 50/50 bet. Unfortunately, I'm too poor to buy in their stocks now and bet on the mid term.

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