
Snap Misses User-Growth Estimate as Facebook Copying Takes Toll - Vannatter
https://www.bloomberg.com/news/articles/2017-08-10/snap-falls-after-daily-active-users-miss-estimates
======
chollida1
Personal notes from the earnings reports:

\- ARPU $1.05 vs 50c y/y

\- rev. $181.7m, est. $185.8m (range $154.0m-$206.0m)

\- adj. loss/share 16c, est. loss 15c (loss range 8c-19c)

\- Short interest is down to 28% of float, financing rate 3.5%, 2 days to
cover

\- daily active users (DAUs) rose to 173 million in the quarter ended June 30
from 143 million in the year-earlier quarter and 166 million in the previous
quarter. Unfortunately this will be compared with Instagram Stories, now one
year old, had more than 250 million users as of Aug. 2, up from about 250
million in June and 200 million in April.

\- $5.4M IN `OTHER' REVENUE MOSTLY FROM SPECTACLES

They seem to continue to follow twitter in amazing product awful company meme.

They tell people to look at their non GAAP numbers and then continue to roll
out poor non GAAP numbers.

On the holy shit scale of things:

\- Stock-based compensation expense ($)2,237,149,000 for the year, that's not
a typo!!!!!

\- Snap’s revenue was up 153 percent from the same period last year, rising to
$181 million. But the amount of money it lost also ballooned, growing about
four fold to $443 million.

So they increased revenue by selling dollars for 90 cents. That's not too
encouraging.

Their stock just touched $12 in the after markets. You've got to feel a bit
for the employee's who were locked up due to earnings.

The Positive:

One positive note, could be that now that they have release their
disappointing earnings, the shorts may cover, providing the stock abit of a
bump over the next week to allow employee's a tail wind that they can sell
their shares into.

\- Every Snapchat daily user creates more than 20 messages

\- Evan and Bobby have agreed not to sell anymore shares this year

\- 250 million snaps are saved to Memories every day

~~~
soVeryTired
I don't understand the shock at the stock-based comp expense. Surely a couple
of million is a drop in the ocean. What have I missed?

~~~
chollida1
That's actually in billions, typically in financial reports the 1000's are
dropped to make the numbers easier to read,my fault. I've made this clear now.

~~~
soVeryTired
Gotcha, thanks

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joeblau
> The company has been urging investors to think of it as different from
> Facebook.

I remember when Twitter tried to convince investors that it wasn't like
Facebook and their stock is down from that period. You might not be like
Facebook, but Facebook is going to try and be like you.

------
capkutay
Totally anecdotal story, but I've been trying to promote my music as a hobby.
The main social channels that independent artists use are facebook/instagram
and google/youtube. There's almost no reason to use snapchat for promotion.
There's no straight forward way to engage a new audience and broadcast your
content.

Snap as it is today seems to be for already established entities to further
engage their existing audience. I don't see a big market opportunity there.

~~~
kilroy123
My side gig is a small business. We advertise heavily on Facebook. I also have
no clue how to approach Snapchat ads. How do I target our demographic on
there? What data do they even have on users?

~~~
pryelluw
You do the influencer model where you pay someone to mention your business.
Thats it. Can be really profitable of done well.

------
kondro
Make no mistake. Snap's (relatively early) IPO wasn't to raise capital for
further expansion, it was to ensure founders had easy access to liquidity in a
service they knew wouldn't thrive over the next 5-10 years.

~~~
billmalarky
If that's the case why did Evan Spiegel keep turning down buyout offers,
including potentially a $30B one from google last year?

~~~
dreaminvm
Was the rumored $30B offer from Google ever serious? This news only popped up
recently with SNAP stock nosediving before lockup expiry for employees.

Another reason for turning down a buyout situation is the terms. They (Evan
and the VCs) would not have such favorable terms as the IPO where they
received substantial stock grants, liquidation preferences and retain absolute
control over the company without requiring a large (any) financial interest.

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ucaetano
Snap's stock-based comp over the past 6 months: $2.2B

Google's stock-based comp over the past 6 months: $4.0B

Yep, this is pretty messed up, it will adjust hard.

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mongodude
Snap still has some of the best user engagement metrics in the industry which
continues to attract top advertisement dollars. Whats worrying is the
apathetic attitude of management to reduce cost and boost revenues rather than
being blinded by the superiority of their product. When Facebook investors
complained about poor revenues from mobile users, it took them no more than 2
quarters to show a remarkable increase in their ad revenue from mobile
traffic. Snap would need this kind of aggressive revenue focus to stand a
chance against the might of Facebook.

~~~
cocktailpeanuts
No, just read up on what happened to Twitter when they went down this route.

Snap is doing bad not because of revenue. Of course that too, but the core
reason is their growth has slowed while it's clear that their core feature is
becoming commoditized. It's not even about Facebook, there are many other
snapchate-esque apps springing up around the world and snapchat can't do much
about it.

In fact this is much worse situation than Twitter where they did keep their
core strength to some degree.

Doesn't matter how much revenue they generate this quarter, if they don't
exist a couple of years later like myspace.

~~~
gcb0
Twitter stagnated years ago. yes they tried, but it was just adding ads and
other crap. they never lift a finger to improve performance or usability.
their site and apps still feel like 6+years ago. like nobody is even working
there anymore.

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nsx147
Most people on HN bearish on SNAP...and I am too in the short term. The
problem with SNAP at the moment it is HARD to spend money on ads. There is no
open API that individual businesses / ad agencies can use to easily
spend...meaning longer iteration cycles for companies trying to figure out
creative etc and turn it into a profitable channel.

As long as they can deliver SOME value to advertisers in the form of app
installs/ traffic to site/whatever businesses will find it and do SNAP's job
for them - turn it into a profit machine once they have programmatic access.
From what I can see they are copying FB's ad platform which is great...once
that API is out there I think it will be a different game.

Or they could just end up like TWTR

~~~
jonknee
The problem is more than it is hard to buy ads, they also missed their user
growth target by a mile (24%). Slowing growth and losing buckets of money is
not a great look.

~~~
nsx147
Yes - one of the problems _

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ehxcaet
I think Snap is pretty dead. Between Instagram and Facebook stories, I just
don't see the appeal of Snapchat. Most of the time, if I want to send stupid
shit to my friends, I do it in Messenger because we can laugh about it later,
too.

~~~
thejocinone
Not the target demographic, 21 and I don't think there's a single person I
know who doesn't use Snapchat while Facebook stories is literally always
empty. I'd say Instagram stories is the real competitor. Even then, when I
meet someone Snapchat is usually the first thing that gets exchanged.

~~~
nihonde
How can a company hope to grow if its narrative is "made specifically to
appeal to Americans who were born after 1995"? The next wave of American kids
will have something else they arbitrarily like better because it was "their
thing". This has happened so many times it's not even worth debating. At the
same time, Snap is totally irrelevant in places like Asia, where the big
numbers for growth are.

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cocktailpeanuts
These guys should not have gone public.

I apologize if I am wrong and they went public because they really had no
other option, but my impression at this point is that they got impatient and
wanted to cash out.

I say this because I think it's ridiculous how much money the founders took
off the table when they IPOd, despite how bad they were doing objectively.

Now they're saying they won't sell their shares "for the rest of this year"
(which is like 4 months away) as if that's some sort of noble thing to do, but
if you already have hundreds of millions of dollars in your bank account
that's nothing.

I am glad to be wrong, so if anyone knows more about this (that they had no
other choice than to go public) please enlighten me.

~~~
joobus
> These guys should not have gone public.

> it's ridiculous how much money the founders took off the table when they
> IPOd

> please enlighten me.

What do you not understand? They didn't run the business for altruism's sake.
They wanted money, and they got a ton of it. It's classic FYIGM.

------
jameslk
I'm betting either Snap or Twitter will be acquired, once their price is low
enough (maybe soon). They aren't just going to fizzle out as they both have
substantial number of users. I don't own either, but my guess is that their
stock will see a big bump similar to the outcome of LinkedIn's acquisition by
Microsoft. This is just a war of attrition.

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pi-err
There's a gap going from "the next Facebook" to "a nice niche for 15-20 US
demographics". There'll be more adjustments as the market answers the usual
question: are they enough advertising dollars to fund a niche social network?

Meanwhile, FB really stands out as the "Microsoft of social networks" in this
decade. They really manage to cut every new head as it pops up from the
ground. FB now works as a system, while any other competitor looks like a
feature.

------
phmagic
On the bright side, hopefully the amount of millionaires minted by Snap will
improve the angel investing scene in Venice Beach

------
overcast
I think at this point, unless your product is pretty niche, it's just going to
get swallowed by the big guys.

------
naturalgradient
Link to earnings webcast, going on right now:

[http://services.choruscall.com/links/snap170810AfkYZvWT.html](http://services.choruscall.com/links/snap170810AfkYZvWT.html)

~~~
mslate
Wow, whoever administrated the Q&A let an analyst on the line who wasn't
expecting it--and was laughing out loud at Snap's executives' answers.

Looking forward to listening to that again once the audio file gets posted.

~~~
mhmiles
For the curious the question starts at around 54:00 with the laughing at 56:45

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soVeryTired
Thank f*ck snap wasn't allowed into the S&P 500...

------
ZenoArrow
Has anyone else noticed the stream of articles set out to undermine Snap over
the past few months? Call me a conspiracy theorist if you want, but I don't
think the sole reason for these articles is about their financial position.

------
tanilama
If your core feature can be easily copied by your competitors, is that an
advantage to start with?

~~~
mandeepj
Only if one of your competitor is Facebook. They have over 2b users

~~~
tanilama
Well, FB is there for a long time, so the whole prospect of Snapchat relies on
that Facebook shows mercy not to copy their feature? That sounds like a
horrible business to begin with.

~~~
yahna
When FB, Google, Amazon, Microsoft are all worth several hundred billion how
much room is left to not get copied?

Seems like the best you are hoping for is that you end up entrenched before
they react (like twitch vs youtube).

~~~
tanilama
That is the point, investors, and engineers alike should be wary of such
companies whose foundation seat on sand.

And I don't really understand when Twitter has set a bad precedent for social
media companies, why people still bet on Snapchat. Weird choice.

------
nextstep
This article from 10 days ago claimed that most employees have a $15 strike
price: [https://www.theinformation.com/soon-free-to-sell-few-snap-
em...](https://www.theinformation.com/soon-free-to-sell-few-snap-employees-
have-stock-profits) (paywall).

Can anyone confirm that most late Snap employees unlikely to exercise options
anytime soon?

~~~
awa
Most late employees got generous RSU's instead of options.

~~~
nextstep
Only to employees hired post IPO though, correct?

~~~
rrdharan
Why would it be restricted to post-IPO employees? It's pretty common to get
RSU grants at a startup pre- or post-IPO. Typically you can negotiate the mix.

Source: have received and negotiated on offers within the last three years
from "name-brand" pre-IPO startups.

