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Snap Inc. Third Quarter 2017 Results
- tim333 9y ago$443m loss in one quarter is quite a lot. There seem large increases in R&D and sales and marketing expenses. Guess they are having to work hard to keep user numbers growing.
- ProAm 9y agoOof, that is a staggering quarterly loss, how long will investors be willing to tolerate that when there are competitors active now in that industry, mainly instagram.
- sjg007 9y agoThe kids still snapchat so... me thinks a while.
- tim333 9y agoThey've got money in the bank for another year and a half or so at that rate so it'll go on a while at least.
- giarc 9y agoWhat kids? Kids with credit cards or kids where most purchases are made by parents and therefore hard to link back to ads shown on SnapChat? I'm in my 30's and don't know too many people that use SnapChat... so when people say "young kids use SnapChat" I'm not sure if that means 13-18 year olds or 18-29 year olds or something.
- FreakyT 9y agoGenerally, I've found the SnapChat-using demographic is today's college and high school kids so, I'd say in the 15 to 22-ish range.
- big_youth 9y agoCompletely anecdotal but every time I go to 'youth' events. Music festivals, University Football games, concerts, the gym, these past Halloween parties, all I see are young people with Snapchat constantly running. I'm 28 and only a few of my friends are heavy users but most people younger than me have accounts. I've met several girls who are weirded out that I don't have a snap.
- nl 9y agoAverage revenue per user (ARPU) – ARPU was $1.17 in Q3 2017, an increase of 39% over Q3 2016 when ARPU was $0.84. ARPU increased 12% over Q2 2017 when ARPU was $1.05. It's brands with credit cards and "kids" with eyeballs. It's a promotions/advertising play.
- spike021 9y agoI'm 25 and many friends still use Snapchat. I think the trend is slowly moving to Instagram (which I prefer), but the usage with Snapchat still exists for sure.
- addicted 9y agoThis is like that Silicon Valley episode, where the only users are underage who are gonna get you fined per use. That's basically SNAP's audience. Young kids who you cannot monetize, and obviously cannot build billion dollar companies on. Maybe once they grow up they will be valuable, but (a) can SNAP wait that long and (b) will those users stick to SNAP once they've grown up?
- weej 9y agoChild Online Privacy Protect Act = COPPA https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/childrens-online-privacy-protection-rule https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-...
- gkoberger 9y agoMy data is anecdotal, but Snapchat is hemorrhaging "kids" to Instagram.
- mrkurt 9y agoWe have matching anecdotes!
- bcantrill 9y agoWell, I wouldn't be so sure. When SNAP had their first big miss a few quarters ago, I asked my 13-year-old (who I noticed hadn't been using Snapchat as much as he used to) about his usage. His response was that "Dad, no one uses Snapchat anymore!" (It's "all about insta", according to him.) While it is certainly anecdotal, it also fits both the data (the declining growth and difficulties monetizing) and the general perception (that Instagram stories obviated Snapchat). But then again, if my son were a kingmaker, Funky Karts would be a unicorn -- so take this for what it is!
- Mrtierne 9y agoIt's looking like investors are interested to know what the real value of the stock is. There's still a large audience to monetize but you're right the competitive set is crazy.
- randyrand 9y agoThe net loss is in parenthesis so doesn't that mean it's a net profit? This chart makes no sense.
- rfw 9y agoIt's just a convention.
- fullshark 9y agoWhat difference does it make? The stock holders have no power.
- justinzollars 9y agoMissing words: Camera, picture present: Application Camera company?
- elsewhen 9y agoSNAP down 16% in after hours trading (at 4:54pm eastern time): https://finance.google.com/finance?q=NYSE%3ASNAP&ei=bSsCWpmnGsTcjAHz34eADA https://finance.google.com/finance?q=NYSE%3ASNAP&ei=bSsCWpmn...
- giarc 9y agoFor those wondering, click on the chart and type 'e' to show after hours trading.
- danvoell 9y agoThanks for the tip, did not know you could do that.
- dopamean 9y agoVery cool. I've used google finance for years and never knew that. I always assumed all you got wrt after hours stuff was the little "After hours" quote underneath the day's closing price.
- mandeepj 9y agoI use Yahoo finance and it displays after-hours stock price by default - https://finance.yahoo.com/quote/snap https://finance.yahoo.com/quote/snap
- giarc 9y agoI wonder if that is a setting you've switched on. When I go to that link it does not show after hours trading at all (it shows the price but not on the graph).
- Eridrus 9y agoAm I reading this right: have they lost 3bn in the last 9 months?
- JonFish85 9y agoThe footnote kind of explains this: "Net loss for the nine months ended September 30, 2017 includes $2.5 billion of stock-based compensation expense, primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our initial public offering." I believe the vast majority of that was due to issuing stock to Evan Spiegel for successfully executing the IPO at given metrics.
- rrhd 9y agoTotally deserves billions for running a money losing operation thats getting eaten alive by the competition.
- hkmurakami 9y agoiirc they handed out a very large amount of equity compensation around the time of IPO, which is recorded as an expense on the books.
- nl 9y agoSort-of, but it's a once-off: Net loss for the nine months ended September 30, 2017 includes $2.5 billion of stock-based compensation expense, primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our initial public offering.
- addicted 9y agoStill leaves ~600mm in losses. Which is still greater than the ~350mm in losses last year. The idea that money given to employees as equity is not "real money" is toxic.
- 9y ago
- nl 9y agoThe headline figure misses quite a lot: Daily active users (DAU)(1) – DAUs grew from 153 million in Q3 2016 to 178 million in Q3 2017, an increase of 25.2 million or 17% year-over-year. DAUs increased 4.5 million or 3% quarter-over-quarter, from 173 million in Q2 2017. That's good growth year-to-year, but not spectacular. Still, they aren't being completely killed by FB/Insta/WhatsApp Average revenue per user (ARPU)(2) – ARPU was $1.17 in Q3 2017, an increase of 39% over Q3 2016 when ARPU was $0.84. ARPU increased 12% over Q2 2017 when ARPU was $1.05. That's really, really good news for them. Hosting costs per DAU – Hosting costs per DAU were $0.68 in Q3 2017, as compared to $0.64 in Q3 2016 and $0.61 in Q2 2017. That's surprising and should be somewhat disappointing. It makes me curious as to the reasons - I wonder if it was international growth where they didn't have good hosting deals or something?
- panabee 9y agothanks for digging into the details and analyzing results in a balanced way! if DAUs increased, perhaps the average user also used snapchat more often, which would increase costs. this is pure speculation, of course, so please share if you discover the cause. either way, hosting costs per DAU is an incomplete metric -- something like cost per minute (i.e., minutes in app or otherwise interacting with snap) would be a helpful supplement.
- throwayit 9y ago3% quarter over quarter growth on a product that is supposed to be still in growth mode is pretty bad. Compare this growth rate to Facebook's when it was was a 200 million DAU and it is not much at all. Add in their enterprise value to revenue ratio and its a very sad story.
- nl 9y ago3% quarter over quarter growth on a product that is supposed to be still in growth mode is pretty bad. Compare this growth rate to Facebook's when it was was a 200 million DAU and it is not much at all. Yes this is very true. They have to find a new growth channel somehow. It's good news that their user base isn't being eroded by competition, but they need to try something different to grow.
- liquidise 9y ago> Hosting costs per DAU were $0.68 in Q3 2017 as compared to $0.64 in Q3 2016 and $0.61 in Q2 2017. Those are staggering figures to me and the trend is equally surprising. Maybe it's ignorance about hosting costs at such a scale, but i feel like cost/DAU should be declining over time, right? Is there something i'm missing here?
- blin17 9y agoIs this a monthly cost or yearly?
- lpolovets 9y agoI think it's quarterly. (i.e. the annual hosting cost per user is a little over $2.50)
- deleted 9y ago[deleted]
- jasongill 9y agoMaybe the amount of usage per user is increasing (a metric that isn't really reflected by just counting DAU)?
- amigoingtodie 9y agoThere is a thriving market in amateur adult modeling and porn. I am thinking of writing an e-book about it.
- toomuchtodo 9y agoI would preorder such an ebook.
- tqkxzugoaupvwqr 9y agoNot OP, but my insight: Adult entertainers use Snapchat as a distribution channel for their own self-made videos. Some offer their Snapchat stories for free and try to up-sell you, others charge you for giving you access to their stories. Payment is through Patreon or PayPal or some other common payment platforms.
- rblion 9y agoHow long do you think they have left? OR Do you foresee them surviving beyond 2027?
- devscreen 9y agoI'm usually quite bullish on Snap. They seem to be doing some things right. From the outside, they seem overstaffed so it's good to see them reducing headcount. The fact that they're rebuilding the android app completely sounds like a bad idea that will be a bit of a timesink.
- Ganz7 9y agoNope. Snapchat is almost unusable on Android right now. Compared to instagram's stories, which loads up in an instant, Snapchat takes its own sweet time. They made the mistake of not paying enough attention to android in the beginning. And now they are trying to fix their mistake. It is a timesink; but they brought it upon themselves.
- spurcell93 9y agoDitto. They did a big upgrade a few months (years?) back and yet my Nexus 6P takes literally 10+ seconds before Snapchat responds to touches. It's horrendous
- richardknop 9y agoAgreed. They need to up their Android game. This is a time sink for sure but it is absolutely necessary.
- afuchs 9y agoThe Android app crashes frequently and freezes up even more often. Have you tried using the app for an extended period of time? Instead of fixing each individual problem, they appear to have declared bankruptcy and are throwing out their old code.
- jondubois 9y ago- They lost $3 Billion in 9 months. - For every $6 they spent, they got back $1 in revenue. - The product is an app which is free to use. - A large chunk of their system runs on Google App Engine; which is probably the most expensive and highest lock-in infrastructure solution that you could possibly use. - The CEO, who was basically fresh out of university, turned down a $4 Billion offer buy the company. So basically; they're a company which loses money at an incredible rate on a product which is nearly impossible to monetise and with an inexperienced and irrational person as a CEO. I'm surprised it still exists tbh. No sane rational person can look at those numbers and think that it's a good investment.
- georgeecollins 9y agoThe thing that is killing them is not the hosting costs, it is the ARPU. They are getting like $1 ARPU per quarter while FB gets like $4-5. That is what they have to change.
- brianwawok 9y agoHow? How many ads will you watch before you dump the platform?
- irishbro 9y agoThey could try introducing some filters you have to pay for. It might be tough surviving the initial backlash due to people expecting them to be free but as long as they keep releasing some free ones they should survive. The other problem is their demographic is a bit younger so might not have that much disposable income but that didn't deter them from releasing glasses that cost >$100. I think parents would be more likely to pay $1.99 for a pack of 5 special filters for their child rather than getting the glasses.
- morrbo 9y agoIMO they really need to do a revenue share. Big influencers (think youtube style ad revenue) would make enough to move on to the platform. Smaller users would still get the occasional 5 bucks, enough to keep people interested. Yes they'd get spam, fraud, and all that good stuff. But honestly they need something different to facebook/instagram/whatever that's not some shitty hotdog
- Devolver 9y agoSnap went from an incredible growth rate to a terrible growth rate because of a few simple (and sadly, quite common) strategic mistakes: 1. Underestimating the competition. Evan Spiegel clearly believed that Zuckerberg would never figure out how to beat him. He seems to have concluded that he was smarter, more creative, and more agile than Zuck. He profoundly miscalculated Zuck's relentlessness and is now losing badly as a result. Takeaway Lesson: Hubris kills. 2. Attacking a market where you have few/zero major advantages. Evan seems to have concluded that the only scaleable way to monetize a social app is with digital advertising. The problem? With <10% of Facebook/Instagram's user base, a tiny fraction of Facebook's ad targeting data, and a set of ad products that were 4-5 years behind Facebooks, why would any advertiser ever dedicate more than their 1-5% "experimental" budget to Snapchat? Answer: They wouldn't, and likely never will. Takeaway lesson: Don't take a juggernaut head on. You will get crushed every time. 3. Misunderstanding your own advantages. Snapchat originally took off because it offered an underserved segment of the market (young people) something Facebook and Instagram did not: a relatively safe, low-judgment place to express themselves. By focusing on the advertising market (and inevitably turning to privacy-destroying data aggregators like Experian to buy ad targeting data on its users), Evan threw that away. Takeaway lesson: Never lose sight of the needs and desires that led your users to choose you. More here: https://exponents.co/snap-facebook-key-competitive-strategy/ https://exponents.co/snap-facebook-key-competitive-strategy/
- mrkurt 9y agoI think the simpler explanation is: a social media monopoly replicated a smaller competitor's best features and let their dominance do the rest. Let's not pretend it's possible to compete with Facebook on a level playing field.
- RandallBrown 9y agoFacebook recreated snapchat mere months after it launched with an app called Poke. It was literally the exact same app, but people didn't use it. It's more than just recreating the best feature.
- replicatorblog 9y agoInteresting factoid: Snap's current market cap ($18.1B) is lower than the price Facebook paid for WhatsApp ($19B). Snap is now "only" worth $4B more than Twitter. Does FB wait for the price to fall and take them out for $10B? Or grind them to dust to make an example of any startup foolhardy enough to forgo an acquisition offer?
- mmanfrin 9y agoWhy would FB want them? They have successfully replicated Snap's model and are taking their users/recapturing shared users. WhatsApp had large marketshare and growth outside of FBs core markets.
- deleted 9y ago[deleted]
- hnarn 9y agoFirst of all, what's your source on the claim that Snapchat are taking/recapturing users, is that proven by anyone or are you making assumptions? Secondly, your question why FB would want SNAP is kind of nonsensical when you consider that FB placed a $3B bid on Snapchat in 2013 -- demonstrably FB does want Snapchat, if nothing else they want them so that they go away.
- mrep 9y agoThe 2 founders own majority share of voting rights so facebook could not unless they agreed to it
- skuhn 9y agoSnap went beyond just retaining a majority of voting control with the founders. Due to the share structure, the two Snap founders control 88.5% of the voting rights. Their shares are worth 10x, and publicly traded shares are worth 0x. Anyone with holdings in Snap who aren't named Evan Spiegel or Bobby Murphy have only one option: sell the stock and recoup whatever they can. That's what people are doing. Snap's share price will not substantially recover, and there won't be a return from an acquisition until the business completely runs out of money.
- whathaschanged 9y agoEverybody talks about the advantages of immediate cashflow, while always ignoring these outcomes. What did going public allow the company to do that it was unable to do prior to selling out? Did they just need the money to keep paying for bandwidth? Because that's the essence of the 1990s dot com game, with private venture capital being replaced by wall street investment firms. Unreasonable demands for 'projected growth' is what always kills companies who otherwise, would be maintaining just fine.
- econner 9y agoI dunno there's something to be said about becoming a real company with reporting deadlines instead of living perpetually in private valuation fantasy land.
- speedplane 9y agoWhy would it be better to be a "real" company that has to make a profit, than one that gets endless investment and gets to live in fantasy land? The only reason is that the "endless investment" dried up.
- countryqt30 9y agoThey knew that the boom was over very quickly, so both the founders and investors wanted to cash out
- speedplane 9y agoThe cynic would say the private shareholders saw the sinking ship, and wanted to liquidate their stock while they could.
- loourr 9y agoCan anyone explain to me what a Negative Accumulated Deficit means in a liability account? As I understand it an Accumulated Deficit is the opposite of retained earning so a loss. But losses are positive values in liability accounts so we should invert it again and get back to an Accumulated Deficit. But instead of SnapChat adding this amount to their liabilities they're using it to reduce their it to reduce their equity.
- azinman2 9y ago“Excess inventory and related charges – In Q3 2017, we recorded $39.9 million of charges related to Spectacles inventory, primarily related to excess inventory reserves and inventory purchase commitment cancellation charges.“ Looks like spectacles was a failure.
- perchard 9y agoa spectacular failure
- minikomi 9y agoAre you speculating or have you seen this clearly? Personally, any way you frame it, it comes down to a lack of focus; failing to act before the lens of public opinion shifted.
- DrJid 9y agoI think he was being punny, but given you use the word "spec-culating" Perhaps, you are being punny too. I can't tell anymore
- schwede 9y agoAre you speculating or have you seen this clearly? Personally, any way you frame it, it comes down to a lack of focus; failing to act before the lens of public opinion shifted. speculating frame focus lens Did I miss any?
- reissbaker 9y ago"have you seen this clearly" :)
- woodsier 9y agospeculating, frame, focus, lens
- 9y ago
- throwayit 9y agoHonestly, the best thing Snap can do to control their destiny is gut headcount by 2/3. If they bring their costs down so they aren't burning cash, they still have a highly engaged user base that is stable with decent advertising revenue. If they aren't burning cash like a wildfire, they can have some time to think strategically to build better user growth and engagement. Spiegel needs a strong COO like Sheryl Sandberg to put realistic controls on expenses. As it stands now they are basically pulling a Twitter.
- teen 9y agoMaybe they can get the fuck out of Venice
- kevinastone 9y agothey did, they're at the Santa Monica airport now.
- wdr1 9y agoSMO was an expansion. They're still in Venice too. https://www.google.com/maps/search/venice+snap+locations/@33.9902077,-118.4778163,17z/data=!3m1!4b1 https://www.google.com/maps/search/venice+snap+locations/@33... http://www.laweekly.com/news/snapchat-leases-more-than-20-properties-in-venice-beach-according-to-activst-8361067 http://www.laweekly.com/news/snapchat-leases-more-than-20-pr...
- DrJid 9y agoWhy? Is Venice expensive place to run operations?
- teen 9y agoThey've helped ruin the neighborhood. Took over so many beach properties, cafes, restaurants etc
- dingo_bat 9y agoSnapchat needs to cut 60% of their workforce and then relentlessly focus on the iOS platform. Make a better spectacles and make it work only on iPhone. Let the Android app languish. This is the only way to long term success. This way they maintain exclusivity and also able to polish the app much better. For example the shit transferring experience on spectacles can be easily fixed if they optimise it for iPhone. And then the people who bought it may have actually liked it a bit.
- btian 9y agoI hope you're not CEO of a publicly traded company
- dingo_bat 9y agoI'm not. I wish you would have actually taken the 2 minutes to explain your comment.
- lobf 9y agoYou think that would signal a healthy company?
- dingo_bat 9y agoYes, I think concentrating efforts on the most profitable segment of your users may be better than diluting the experience for everybody.
- aylmao 9y agoThat's your opinion from your vantage point. How do you know iOS is most profitable? For all we know, most of their users, or maybe most of their growth potential could be on Android. Lets not forget international markets run mostly Android.
- hnarn 9y agoMaking hard decisions to get the bottom line back on track would be a better signal of health than bleeding money and doing nothing about it.
- chk_ur_autism 9y agoFuck the mods.
- richardknop 9y agoThey are burning a lot of money quickly but that is not the biggest problem. This is most worrying about Snap: Daily active users 178M (est: 180.5M) Their active users growth is very slow. 166 (Q1) -> 173 (Q2) -> 178 (Q3) It seems that already slow growth is slowing down even more. They started the year with 5% quarterly growth, then went down to 4% and now barely 3%.
- jmbrook 9y agohttps://wolfstreet.com/2017/11/07/how-can-a-company-once-worth-30b-lose-443m-on-just-208m-in-revenues-heres-how/ https://wolfstreet.com/2017/11/07/how-can-a-company-once-wor... Has a fairly bleak write up. It makes the point that if enriching the founders is the aim they are doing pretty well.
- Quarrelsome 9y agoI love that sales projection that demonstrates some people are unaware that there are potential uptake numbers lower than 1% :D. > "Even if only 1% of people buy them we'll still profit!"
- dagw 9y agoI love that sales projection that demonstrates some people are unaware that there are potential uptake numbers lower than 1% "The number smaller than 1 is 0, and we're obviously going to sell more than 0" ;)
- tim333 9y agoThe people who made that projection are pretty aware. They are sales guys trying to push the stock.
- bojanvidanovic 9y agoAfter reading what happened to spectacles, I thought they would significantly drop prices.