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Often in these situations, there are a few reasons. Monetization of users isn't always as good as the MAU would make it seem, or those users have significant ov
by madrox 4y ago
Often in these situations, there are a few reasons. Monetization of users isn't always as good as the MAU would make it seem, or those users have significant overlap with Snap and don't represent a net gain to the company. This is especially true if acquisitions are more of a defensive measure (buy a business so someone else can't gain access to the users you already have).
Finally, sometimes in a bad market a business can be worth more as a write-off than a sale. Depending on Snap's balance sheet, they may get more money back in tax breaks than they would if they sold it (and, again, giving a competitor access to users you already have).
This is all hypothetical, of course. I don't know anything about this specific situation, but it's why lots of seemingly successful products get killed.
- ec109685 4y agoHow does the write off being more valuable than selling for parts work?
- mguerville 4y agoYou have $100m in operating income, but you shutter a business unit and take a writeoff for $100m, you now have $0 profit and therefore 0 tax liability (you saved ~$37m assuming that’s the effective tax rate). If you sold the business for parts, for $50m you end up with $150 in profit (technically could be less if you took an impairment (like a writeoff but not for the full amount since you clearly recouped some value). You pay taxes on your profits and end up net negative against the scenario where you just shut it down. This is overly simplistic but the gist of it is directionally correct.
- ec109685 4y agoGot it. Not sure you’re supposed to write off a business for 100M that you can only shutter for parts for 50M.