Some quick highlights as to why the stock is being punished.
> Adjusted Ebitda Loss $188.2M, Est. Loss $176.9M
> 1Q Daily Active Users 166M, Est. 168M
> 1Q Rev. $149.6M, Est. $158.6M
> 1Q Loss/Shr $2.31
I'm guessing the big issue is the miss on Daily active users. This is the same thing that caused the street ot hammer twitter.
Rule of thumb for non profitable tech companies....
If you are a company that isn't making a profit and you continually preach look at the users, look at the users. and then fail to even hit your target on that, you're going to get punished.....heavily.
Or put another way, you can either make a profit or make your non GAAP numbers, but you have to atleast hit one of the two.
One other issue from the Bloomberg momentary....
> A very key number here is revenue per user. Snap's results today are indicating average revenue per user at 90 cents. This is down from $1.05 (14%) from what it reported for Q4 2016, before its IPO.
To be completely fair, SNAP management wanted full control to build for the long term and Facebook was down 12% after their first earnings report and Twitter was down 24% so it might just be that its painful for rookie CEOs to manage a public company.
Too bad for employees that this comes before the lock up period ends.
EDIT
Just on the earnings call, they said they don't break out Spectical's numbers but the revenue it generated was about $8 Million.
> According to the report, Instagram Stories has more than 200 million users per day, with that number being measured by people updating their story or watching a friend's.
I wonder what the number would be if those who only watched stories were excluded. Its also worth considering that Instagram delivers some of their announcements as stories and whether or not people viewing those also count towards the active user number.
This is very important. I watch Instagram and Snapchat stories every day. Instagram is 2 or 3 celebrity stories, then I scroll down to look at a few new pics. Snapchat is a constant stream of glimpses into the lives of my close friends.
edit: I'm curious if this is true only for my friend groups/demographic/principal component, poll here: http://www.strawpoll.me/12939274
Why? Their monetization strategy so far has been brand advertisement interspersed as vertical video ads between Stories. This doesn't require any particular kind of content, only that they can hold your attention for 10 seconds or so while they show you an advertisement.
Good point but I think the solution is not to gut their good user experience, but to figure out better monetization strategies. Because better user experience is about the only thing keeping them in the Game.
This thread is very interesting for me. I've never used Snapchat before, and I deleted my Facebook years ago. However I do use Instagram daily. The caveat there is that I've never viewed or have taken a story. Video just feels very odd and antithetical to the reason I use the platform (which is to post outdoor photos). I guess if I could upload high quality video to a story I'd be more interested in it.
Not to forget that for many, many users in emerging markets, the mobile carriers offer free data for WhatsApp. Traveling through Colombia, and I can use WhatsApp status for free over here. SnapChat kills my data.
I was about to write the same thing. Here in Sweden you often see adverts for telcos where they offer free data for Facebook usage and stuff like that. We're not a developing country and you'll get a fair bit of data at a reasonable cost here, so it's perhaps not as obvious how this skews things in favour of the big players, but it's there alright, and it's sad.
I really really really hope this does not happen. I already don't like how much data WhatsApp eats after downloading shared images and such. I want WhatsApp to be text and group text and thats IT.
I suspect it'd be pretty different. Stories are right at the top when you open the app and are used by quite a few celebs - that must inflate the numbers a lot.
I'd be interested in hearing if anyone else absolutely hates this new stories thing Facebook is pinching from Snapchat.
Every damn time I pull down (Messenger on iOS) to reload the conversation list I end up at the damn camera. That's not how literally every other app works.
Now Facebook (iOS app) has updated and it feels like whenever I accidentally drag my thumb slightly in a non-specific direction across the screen the damn camera opens there too.
Bring on the next social network. This one's getting all gross and gooey.
YES! So much this! I want Instagram to be the social network of superb images/very short videos. I just HATE that now there's an extra tab at the top for stories and such. Why ruin an app that was doing its job so fucking well?
I used it once then realised any responses I got were sent as a context-less Facebook message. If you click "Haha" in response to someone's story it sends the literal string "Haha" as a message to that user.
Agree completely, facebook "stories" feels cheap and forced. My anecdotal data point, is that most people I know (my age twenty somethings, younger, and even parent's age) enjoy using snapchat, partially due to the regular and fun updates to the computer vision / AR filters. And that very few people communicate with fb stories or use it aside from promotion (they run a business, or are a model, etc)
You make "it's not Facebook" a key part of your value proposition. This was the case for Snap early on, and I believe it's a big part of the reason why they got so far. Their users needed a social network separate from their parents, and they had been trained to fear long-term memory upon which Facebook had built their product and their business model. WhatsApp was also successful in warding off FB Messenger's efforts to clone it, in large part because it offered independence and a very un-Facebooklike product experience.
Facebook has shown an impressive flexibility and willingness to pay the costs of making big changes when they need to, e.g., acquiring WhatsApp or shifting their product toward Stories. Still, a startup go a really long way by building a product that carries "not Facebook" as a key value proposition.
I'll indulge. When Facebook seriously have you in their sights, financially, the smart move is what Snap did: rush for IPO before your numbers start getting affected. Product-wise it appears that if Facebook make a billion dollar offer, accepting it is a wise choice to maximise usage growth and interaction.
Isn't it better for everyone who's a part of Snapchat or a pre-IPO investor that they didn't allow FB to buy them for $3B? Even if Snapchat goes to a $10B valuation (which likely won't happen this year) and stays around there, that'll still be worth it for almost everyone. Since a lot of insiders will have already taken some money out before then as well.
At this point though, simply as a consumer, I would have appreciated Snap being acquired by FB so that FB wouldn't bastardize all the other social networks to try and emulate Snap. But looking long term, I think this might be a good thing... just in the short term it really sucks.
There's a reasonable concern in the air that it's getting more and more difficult due to network effects, but the short answer is the same way you always compete with big companies -- you can be more agile and engage with the user base in a way that big companies just can't because of bureaucracies and unwillingness to take risks.
This aspect is what makes me think Snap might be a canary in the coal mine.
In the temporary image space, virtually all of the innovation has come from that company, whether it's the initial concept, expanding scope with stories, adding visual effects, etc.
In the end, it might not matter. Facebook repeatedly cloned Snapchat's features, starting with the Poke app in 2012 that Zuck reportedly wrote code for himself.
The result? They jammed it into all of their products (Insta, Messenger, WhatsApp, etc.) and seem to be riding the network effect to success.
Not saying that smaller players can't win, but man, brute force and a big network were really effective this time.
Seriously, though. I never understood why Groupon, Snap, etc. turn down these multi-billion dollar acquisition offers. It's not like these products/services have a huge impact on the world (if they were to disappear, who would really care?), take the money and run.
Instagram selling to FB is a potential mistake in hindsight. Even without FB's direct backing, IG was poised to grow like crazy. Probably could've IPOed or sold to FB or someone else for 10x or 15x 2 years later.
From what I've heard (don't quote me on this), I think Instagram was having serious financial difficulties at the time of the acquisition. The costs to run the service (media transfer and storage are a massive infrastructure cost) were astronomical. The Facebook buyout was almost the only way they'd stay alive without giving up a massive piece of the company in a funding round.
Aren't they better off not selling for $3B? Insider stocks will be able to sell their shares soon. Snapchat is unlikely to be at a $10B or lower market cap for the next year. So people have plenty of time to take some money out.
When you put it like that, you have to wonder how they have any chance at all, save some crazy pivot.
From a consumer perspective, it's disappointing that Facebook controls itself and now this arena. It's gonna be hard to find innovation when purchasing and cloning are the way to do business.
In some circles, having an Instagram is as expected as having Facebook, which makes abstaining difficult.
> It's gonna be hard to find innovation when purchasing and cloning are the way to do business.
Welcome to Microsoft circa 1990. People forget how much oxygen Microsoft could suck out of a space simply by mentioning they were going to develop something.
I agree, but what can we do? Snap Inc. isn't exactly some teenager trying to make it out of their parent's garage. Patents obviously don't work, or at least not in their current form – troll litigation should suffice as proof of that – and besides, the big co's can just as well have departments doing nothing but patent all-the-things.
As so many like to say: they idea matters less than the speed and strength of execution. It's clear that the network effects of Facebook makes it very difficult to compete, but is the problem really that they are copying features from other products, or is that just the symptoms of a bigger issue?
Facebook effectively has a monopoly on the digital social network, no matter how many millennials say it's "not cool anymore" – they're still on it.
My personal hypothesis is that this is because we lack a decentralized identity feature on the internet. For better or worse, Facebook and Google solved that problem, and now everything you do is connected to either your Facebook account or gmail. It doesn't matter if you don't have those accounts, becasue everyone else does, more or less, and they're locked in. You can't bring your identity with you. Sure you can close your account and possibly download your data, but if you do that you sever the connections, which is the true valuable bit of the network – the nodes less so.
I really don't like the sheer dominance of Google and Facebook, but I have no idea how to get away from it either. Makes me small just thinking about it.
Snapchat and Instagram definitely offer in somewhat similar spaces. All the semi-famous people I follow on instagram have their snapchat username right there in the profile.
People used to share Myspace and Facebook handle as well for a period of time...
Snap used to have an advantage in terms of age group. I'm curious if this is still the case.
Anecdotally I've heard from my partner that Instagram effectively duplicated a core feature of Snapchat to the point she no longer sees the point of Snapchat. But she always saw Snapchat as a side novelty, largely because she used Instagram well before Snapchat.
But I also see this as an age group thing, Snapchat had the image of being popular with high school kids while Instagram had penetrated the university-30yr old category most effectively. So it's hard to say merely as an outside spectator. As well as being geographically limited in my perspective.
I would argue that's a relic from the past. Most Instagram celebrities also had snapchat to post 'raw unedited' updates. Now that Instagram has stories, there probably isn't a strong reason to double post on snapchat as well.
From a different perspective you could point out that the innovative companies (in this context, Instagram and Snapchat) were indeed capable of significant (relative to the space, at lease) innovation (and getting extremely well paid). I don't see how the risk of "ending up" like Instagram or Snapchat would discourage anyone from making a play in the field.
Unseating Facebook is a very different play from merely innovating.
>Facebook has 18 percent increase year over year. They have ~2B users.
That's nearly 2/3 of people on the planet with Internet connections, according to estimates by the ITU (approx 3B internet users by the end of 2016) [0]. Even if I believed that user figure, which I dont, there is no way Facebook can grow at the same rate for much longer.
I don't know anything about this overall, but I have some interesting anecdotes that show the power of Facebook around the world.
I've done some pretty substantial traveling throughout Asia, and just about everyone with a smartphone that I've met also has a Facebook account (excluding China).
In Myanmar (aka Burma) the strict military government restricted internet usage until they turned over control of the government last year. Most people are (within the last 12-24 months) using the internet for the first time! Most have never used a computer, and they only know the internet from an (Android) smartphone. However, every single person who I talked to there who had a smartphone had a Facebook.
The one local I talked to most in depth about this had never used Google! He said he didn't know how to use Google, and he didn't think he needed it. I explained what Google can help with: searching for information, reading news, etc. He showed me that he read news and did searches for things all from within the Facebook app.
I saw similar usage of Facebook in other developing Asian countries (Nepal, Thailand, Indonesia), where people used Facebook as a kind of substitute for a web browser / search engine.
You and I would never think to use Facebook as our internet portal, but it seems to be a very sticky and powerful tool for many of those just coming online.
>I explained what Google can help with: searching for information, reading news, etc. He showed me that he read news and did searches for things all from within the Facebook app.
This is the most frightening thing I've read in a while.
This is such a crappy suggestion: That we are all just acting in our own self-interest. I'm privileged enough that this is not the case, and I despise the implication. It's like voting for Trump just because of the huge tax cut I will get. Not everyone thinks this way.
This. I don't know if the parent was asking a serious question or trolling, but my response is an "anti-Facebook" one, not a "pro-Google" one. Facebook has demonstrated that it is willing to exert much more editorial control, and is much more interested in "controlling your experience". Google seems focused on attempting to provide you with the most quality content that addresses your query.
Maybe that's what it is. "Quality content" and "Facebook" in the same sentence sounds absurd.
I guess it depends on how you see things. I see Google wanting to exert their own power and control on you as well. See all of their own property integrations into search results, quoting the first result as an "answer" whether it be right or wrong, snippets in news, Amp, Yelp and other suing Google for preferring its own placements, Google recommending you install a modern browser called Chrome when you're using Firefox (not sure if they do this anymore. I'd assume not).
Google also linking to the web after ads or their own stuff is a benefit over FB of course. But I don't see that being Google's focus.
Buzzfeed has some surprisingly good long form pieces. A recent one discusses in detail what's going on in Myanmar[1]. I found it interesting, but depressing.
The cesspool of fake news, Trump gossip, etc, turning into hot topics amongst Myanmar's budding online culture is sad, like a virus spreading.
Another worrisome side effect is the quick adoption of the medium by hate groups inciting violence towards religious minorities with outright lies compounded by the fact that most Myanmar users don't yet know fact checking is possible thanks to the walled garden.
Some users have landed in jail for not realizing posts containing jests about government officials were viewable by said authorities. The country's speech laws are still evolving and users struggle to understand brand new ceoncepts like scoping of comments.
Facebook saw the "we're saturating the number of people on the Internet" wall years ago. That's why they zero-rate the app, and integrated SMS notifications and had J2ME and SIM apps.
They also have a "free basics" program which partners with networks (I think primarily developing countries) and gives people access to Facebook with no network/bandwidth costs. Seems like a win-win? https://developers.facebook.com/docs/internet-org
Gotcha. I'm not sure it's a win-win, but it feels crazy to say that giving 0 free sites is better than giving Facebook free. It's a level playing field, sure, but consumers are worse off than if they had free access to Facebook.
In my opinion, opportunity is better than equality.
A lot of people think this way, Zuck included, and that's what makes the decision in India so interesting and, at least for me, correct.
FB does not categorically improve the quality of life for its users. FB provides connectivity to others... this is good. But if the cost is making you think the world is askew from what it really is because all you see is what FB's feed shows you... well that's a steep price that nobody, even the poor, should be asked to pay.
I wasn't suggesting it's failing. The point I was replying to was if Free Basics is a "win-win" and I'm saying there's at least one large democratic nation that thought otherwise.
I envision that Facebook really wants to become the wechat of the world. From the lessons of Trump, if mark becomes the president I see him really pushing FB politically.
You and I both. Facebook numbers have been a scam for a long time. I look at most social media as I look at multilevel marketing... it's all sunshine and rainbows until it simply collapses. There are no 100 year businesses in social.
I think you're severely underestimating the scale and reach of Facebook. There's a reason it's a ~450B company.
It really does have that many users. Even if a solid 20% of them are all fake accounts (which I don't think the percentage is that high), it's still a large part of the connected world.
There's a reason Facebook is developing technology to bring the rest of the unconnected world online. It's because they know they'll reach a point where they'll have the whole connected market, and the only way forward is to grow the market to it's full potential.
Don't let your hatred of the product or company blind your understanding of its scale and influence on the world (both positive and negative).
It is not hate and you may well be right about the scale and reach of facebook right now. However, I think many people over-estimate the real utility of Facebook. That is, lives would not materially change for the better or worse if facebook fell off the face of the internet tomorrow, imo. Emotional reactions aside, Gajendra from Nepal and Tom from California would continue with life as they did before Facebook was available.
The Yellow pages had a similar story not too long ago...
I really do think that broad, sweeping statements like that can't be used so liberally for a product that billions of people use in so many different ways. The way we use Facebook here in America is not the same as the way people use Facebook in Thailand (in fact, it's extremely different). The way a college student uses Facebook is not the same as the way a mid 30s male uses Facebook.
I'll give you one data point. When I was in college, we had a Facebook group for every single class and they were extremely valuable. We also used Facebook events heavily for various on-campus events. This too was extremely valuable. Now that I'm out of college, I have less affinity with those products from Facebook but I gravitate towards different parts of the site now.
Either way, you can say that your life would not materially change for the better or worse if Facebook fell off the face of the internet tomorrow. That's a valid opinion to hold. But don't make the folly of generalizing a global product that is so incredibly pervasive in ways that we can't fully understand. I'm not saying that this reality is a good thing, nor am I saying it's a bad thing. However we can have better conversations about the effect Facebook has than "Facebook is useless", "Zuck is a spy", "I deleted my account, fuck FB", "All their metrics are fake", "Something something Myspace".
Those simply aren't interesting statements anymore. They just aren't. They're tired and have been repeated year after year for more than a decade.
Agree and upvoted. That said, sweeping statements can be useful if they point to a trend. In mature markets, there does appear to be a segment that is turned off by FB and it's not clear if these are being replaced by newer users. If that pattern repeats in newer markets then as the user base ages it portends to trouble for FB.
For a large portion of the population, Facebook IS the web. You say it adds no value. I say it adds a ton: Facebook is their Google. Without "a google" - something to make sense of this mess of trillions of pages, the web is damn useless. Google might be your Google, but Facebook is their Google, and becoming more people's Google every day. Sure, you can slot another company into Facebook. But you could do the same for Google too. Doesn't mean they're useless or scams.
Most importantly, Facebook is the small town local web that never really happened anywhere. Or rather: that happened everywhere, but only exactly once, being outdated ever since, complete with mandatory "under construction" gifs and a forum where the last post is an advertisement for some polyphonic ringtone scam.
For a lot of people, Facebook as addictive as watching TV so I don't think they'll be disappearing anytime soon.
In fact this is how I think of them and their business interests; they are nothing more than merchants of human attention (like Google). After all, the bulk of their revenues comes directly from ads.
VR may be toy-like tech for a lot of people today, but Zuckerberg is betting on it to be the next big frontier for computing similar to how they doubled-down on mobile with the emergence of touch screens heralded by the iPhone.
There's no 100 year business for the web period. It's only a few decades old. You can predict all you want about Google or Amazon, but you don't know where they'll be in 50 years.
> How much social media activity/growth is not human?
As much as I agree with you, that kind of activity especially by first party or those related is called market manipulation. SEC and investors won't take lightly to it.
And who will blow the whistle? One person could deploy a bot army to juice numbers.
On a related note, the market itself is controlled by HFT bots. Don't rock the boat too much and no one is the wiser.
Edit: Would love to some actual debate on this rather than downvotes with no context. I have deployed many bots for fun to twitter and reddit. I could easily do the same on Instagram, Snap or Facebook. I could even make them look "Kinda real" with markov chain driven text input. Super, duper easy.
I suspect people are downvoting because it's easier than getting into a discussion with someone whose tone doesn't convey a willingness to have a constructive conversation.
Your blithe comment has some merit on its surface -- I also "think" it seems trivial to do account fraud at a large scale -- but it pattern matches against the "I can build Stack Overflow in a weekend" mode. I can only guess, but I imagine the difficulty factor going from 500 to 1 million bots is much greater than 200x higher. (As in, if there are 1,000,000 people right now on Earth who could do the former, I suspect there are way fewer than 1mm/500 for the latter.)
There are undoubtedly bot networks that operate (although we have no idea for how long), at a scale that would likely surprise me. However, even that doesn't make the data useless (especially when frequently cited against a previous measurement).
Finally, your non-sequitur about markets being controlled by HFT bots hit a number of negative heuristics in my brain.
I keep trying to tell people that Snap can't grow to targets unless it opens Asia, and no one in Japan (at least in my first hand anecdotal experience) uses it or even knows what it is.
> A very key number here is revenue per user [...] this is down from $1.05 (14%) from what it reported for Q4 2016, before its IPO.
I disagree a little with Bloomberg here, the numbers are bad (active users isn't great), but given the same number of users you'd expect advertising revenue (which is what they're driven by) to be down Q1 vs Q4. Ad budgets and spending is cyclical and seasonal, far more money is thrown at the wall during the holiday period than after.
Yes. They have your attention and they can do things to slowly nudge you to start engaging in deeper ways. For example your daughter grows up and is used to the "Snap-like" interaction already and will engage far more on Snapchat or similar products. Or maybe she one day finds the "Discover" section of the app and starts watching content on there.
The fact that they have you and your daughter engaging with the product at all is a meaningful thing for the business. There's a lot they can do with even this cursory engagement over time.
Nope. This sounds very SV-ish and I don't mean that in a disrespectful way.
I am not a Snap user period. To count my daughter as a user is just plain sad from an investment point of view. She is not going to have a job for 9 years minimum. That means I control the purse strings.
Sanp is like those games that have a gajillion users and then simply die as no one plays them anymore.
If you buy a newspaper only to let your dog pee on it, are you a user of the newspaper? Just because you (or your child) don't use the product in the way it was intended doesn't mean you're not a user as far as the provider is concerned.
(And the fact that there was a monetary transaction for the paper is not unlike going through the pains of downloading and installing an app on your phone.)
Have you worked in consumer tech or marketing before? I think you're severely discounting your usage of the product and what that means for the company. The reality is that usage and engagement are completely different metrics. And even in the engagement category there are a whole suite of metrics for "depth of engagement".
That means roughly this:
* It's a funnel (one that is heavily tracked)
* They know how often and how deep users' engagement patterns are and how they shift over time, over different feature launches, and over the age of their users among other parameters.
* They know what it takes to get a lightly engaging user to become one that is more deeply engaging and they know the rate at which this conversion happens.
* They have cohorts of users and they know what types of users move which way through the funnel and how fast.
* Using all this data, they have at their disposal different levers to pull (growth, marketing, product) to move the numbers in the right direction.
Again, all of this doesn't mean that Snapchat will be successful in converting you or your daughter into a heavy Snapchat user today or even tomorrow. But you're painting too simple of a picture using a single high level metric and logical simplification of a process that's very complicated.
The biggest point I want to make here is that NO TWO USERS ARE THE SAME. So to use a high level metric that conflates different types of users by definition and then making an implication about the health of a company using this specific metric's weakness is just silly. There is data that you don't have access to and you're not recognizing that.
If you watch the advertisements and can actually act on said advertisements all is well with the system. However, if you have zero spending power, no influence and miss the ads... all is not well.
When are we going to say; What the hell is the point of this? Users "using" something doesn't make it profitable unless they are willing to pay you for it. Furthermore, advertising IS NOT working. Look at retail, malls AND name brands... Horrible performance for the bulk of recent memory.
As someone who never has and likely will never use Snapchat (tried it once, didn't see the value), Snapchat has a major problem that Facebook doesn't: it can't attract older users.
My parents, older relatives...everyone I know is on Facebook or Whatsapp.
But they will never use Snapchat.
Snapchat's users are only going to be younger. This makes them an attractive investment 10 years down the line, but not right now.
That's like saying the problem with water is that it makes you less thirsty.
Snap's shtick is that it's not Facebook, that your parents aren't on it, that your creepy uncle's friend who came to the bbq last 4th of July is NOT there and that Snap is not going to geo-recommend you add him as a friend...that's the point and the main reason it got so popular so quick.
How you monetize that? Dunno, but it will sure make your app popular.
Is it surprising that revenue per user was down on Q4? Q4 is by far the biggest quarter for advertisers, and its typical to see agencies trying to get rid of their budgets before the end of the year. At the company I worked for there was always a Q1 slump.
How is DAU audited and enforced, is there a standard?
Things like ebitda have a pretty standard audit procedure, there are bank statements and receipts that an auditor can check, and they can investigate variances.
DAU doesn't seem to have a precise definition, and how do we know the method for collecting this metric is accurate? I've personally stuffed up this kind of collection before, and once you do it's very hard to backfill.
Likewise Facebook has had several prominent advertising metric failures, how can we trust their DAU number?
No standard, it's common for companies to make up their own (ridiculous) metrics defined however they want.
At the end of the day it's just something that the board have defined and decided to use, and if they mess up the collection then it's embarrassing for them, they lose credibility, and investors will sell or install a new board.
Even for things that have (more) precise definitions like profit or earnings, how does one know that the numbers are not deliberately or accidentally incorrect? You just have to trust the board, accountants, and auditors to do their job, and if you don't you shouldn't own the stock.
I almost wonder if there's going to be a "liked it before it was cool" paradox to a lot of these social sharing startups dreams of continued user growth and eventual profitability. Facebook seems to have reached escape velocity as a quasi public utility, a ubiquitous enough communication medium that almost everyone is peer pressured into using it even though they increasing dislike it.
But the other social sharing platforms then become escape hatches for the cool kids to hang out and share stuff in more authentic/novel/exclusive communities, fueling a few to rocket growth and unicorn valuations. But like that indie band you discovered that's now playing on the radio every damn day, the bigger it gets the more the early adopters will move on to something else. And especially in a situation where your primary market is teenagers, there's nothing less cool than what was cool 5 years ago.
I get your point but that seems like a bad example to me. If the startup is the local indie band that makes it big then yeah, maybe they lose the trendy first users, but presumably they "made it" and are far more profitable by staying on the radio, even if they lose the few original fans.
FB and Twitter have those dynamics more than Snapchat does. You can't really "see" who else is on it unless you go looking for that. On FB and Twitter, stuff from people you don't follow or know is shown to you. Basically there isn't a "feed" in the same way.
This is one of the ugliest financial statements I've ever seen. The multi-billion dollar loss is due mostly to stock compensation, but still their COGS or cost of revenues sold was greater than their revenues. That's probably the first time that's been seen for a sizable software company in the history of the industry.
They said their revenue per DAU is $.90 and their server costs per DAU were $.60...so that means server costs were around $100mn while total COGS were $160 mn. So what was that other $60 mn spent on? Admins? But I thought they used the Google App Engine infrastructure to avoid any server admins and such.
Their revenues are exploding with their revenue up nearly 400% from last year, but were below estimates as was user growth which are probably causing the current stock price drop.
"server costs" (Google Cloud) is an affordable $450 million per year commitment.
They apparently have 2,360 employees doing who knows what (not growing the user base).
My favorite part:
"Spiegel laughed out loud when asked if he was worried about Facebook copying his features. “Just because Yahoo has a search box doesn’t mean they’re Google.""
We'll check back in a year to see if he feels the same way.
> They apparently have 2,360 employees doing who knows what (not growing the user base).
I don't understand what all these people do all day. Same with Twitter, they have 3860 employees according to their website. It seems like 10X as many as needed. I've worked in a few offices with less than 100 employees total, and while I have no idea what it takes to run a service with that much traffic, Snapchat runs on Google's cloud service.
> “Just because Yahoo has a search box doesn’t mean they’re Google.""
Maybe it will be a classic in the same genre as Ballmers answer to what he thought about Apple's new product the iPhone.
I wonder if they would have done better with a stack like WhatsApp - Erlang running on their own servers. Or even switching over to that in the future. I think WhatsApp at 500m users had about 35 engineers and 550 servers and so costs maybe 10% of Snap's. http://highscalability.com/blog/2014/3/31/how-whatsapp-grew-...
Bandwidth will almost certainly be their dominant economic input.
It's funny, a lot of people think you exit AWS/GCE to rack your own machines, but I was on a datacenter tour in SV a few years back and was reminded that having fine-grained control of your network is just as a big a reason to do it. Adtech/finance do this all the time to control latency, I imagine it's also a consideration for Snap.
I wonder if they'll ever build a CDN. It's probably not the right traffic pattern without a lot of re-sharing, but still, I could see it.
I read their S-1. The other problem is that ex-US, bandwidth is more expensive than in the US, even though the addressable ad markets are smaller. People are poorer and don't spend as much.
You have to admire facebook. They've been focused on low-resource Android for a long time, even requesting employees to use slower connections from time to time to make them viscerally feel the effect of low-bandwidth Internet. fb really gets that they need an Asia growth story and they've done pretty well. I simply don't see how Snap will do anything comparable given that their entire service is predicated on high-bandwidth video shot from high-end smartphones even half the US probably can't afford.
Instagram Stories launched Q3'16. Going forward, growth is going to be flat, maybe even negative, now that every messenger service now has their own Stories clone.
> Going forward, growth is going to be flat, maybe even negative, now that every messenger service now has their own Stories clone.
This is my thinking as well. Stories was a good idea but there wasn't anything proprietary about it and now that a larger service (Instagram) copied it much better there isn't much point to using it on Snapchat anymore. I would imagine their users will continue using their silly filters and doing direct messaging but so many apps have built in filters now I don't know that it is a big enough differentiator anymore.
I think the performance of their stock is going to depend on how well they execute on a new product like spectacles.
While a very small market segment but I've noticed that my user demographic's snap story usage has been in rapid decline. The people whom I saw using snap stories the majority of time, have since cut their usage in half if not completely and switched to Instagram stories.
Going to be very interesting to see how they handle user growth & user engagement.
1) Teenage users, their bread and butter, are leaking out to Instagram
2) Older users, their growth market, are being "stolen" by the various messaging apps that they're already on (plus Instagram)
So now they have to simultaneously fend off Instagram draining their primary userbase, while also competing with all the popular messenger apps cloning their main product feature.
The latter is going to be just as difficult as the former. Overseas, WhatsApp (Europe), and WeChat and Line (Asia) are going to seize whatever int'l growth they were hoping to grab. In the US, chances are that if Stories catches-on with the older crowd, it'll be through either Instagram or the various messenger apps they're already on.
During the IPO roadshow, SNAP was trying to position itself as a media/entertainment company, but media companies will follow the audience, and it's hard to see them sticking it out with SNAP if viewership numbers falter.
Hard to see how they claw their way out of this. The comparisons to FB are poor IMO because they at least strong MAU growth going for it and no real viable competitors with an alternative product. Even the comparisons to Twitter are flawed. The doubly whammy of decline growth + decline revenue per user is creating the perfect storm for SNAP.
I personally don't see how it keeps going in the face of Instagram, though their filters are pretty cool. Instagram could copy that too of course, but it wouldn't have the same whimsy that Snapchat brings to the feature.
Is there any public company that releases earnings in realtime rather than quarterly and/or annually? Has this ever been tried? Is there any rational behind earnings being reported quarterly/annually besides it being aligned with existing regulatory and accounting procedures?
The procedures to produce an SEC report take time and aren't automatic. Management discussion, etc.
As a former professional investor quarterly is fine. i want mgmt focused on running the business, not reporting to investors. Anyone who wants more frequent data so they can trade the stock can hit the road as far as I care.
Interesting! Thank you for your perspective and insight.
Do you think that having some data reported automatically in realtime could minimize surprises such as what we see here? Perhaps then the quarterly reports could be more focused on describing the longterm strategy and market landscape?
Annual reports are for strategy. If you buy shares in a business that changes strategy on a monthly basis, you don't need more rapid reporting, you need to get out.
Go read Buffetts annual shareholder letters, they are free on the internet going back 40 years. He repeatedly makes the key point that your investments need to have some enduring competitive advantage, if they do you don't need constant upgrades, if they don't sell. Enduring competitive advantages don't disappear over night, if they degrade they do it slowly over many years.
If true it makes them terrible investments, because their future income streams can't be estimated with any accuracy, so they cannot be valued.
But in reality it's not totally true. SnapChat and (probably) Instagram have huge installed bases, but haven't yet figured out how to monetize them. They aren't businesses or investments, they have no strategy other than just pure speculation.
But Uber provides a service connecting riders with drivers that costs pennies per ride to deliver and earns dollars per ride in revenues. If you know how much Uber is spending to build out markets, and on unneeded distractions like UberEats and self driving cars, you can estimate the value of their core business. Uber's strategy has never changed, they've just obfuscated it.
Competitive sales teams in the enterprise sales world would be all over that data to try to spin a narrative and for competitive intel. Agree that it wouldn't be massively helpful.
None that I'm aware of. Actually, some people think that quarterly reports are too frequent and cause CEOs to think short term rather than long term and want to do away with quarterly reports.
You can google accounting and income statement, you'll see why it is done at least quarterly...as a business your operation occurs over a period of time, as such the impact on your books need to be updated accordingly...it is not just a matter of what makes sense but a matter of what is legal, there are accounting rules around how you do things like expensing (rent, depreciating assets..etc) and revenue recognition (can't do it before you deliver service/goods)...I believe quarterly is the wall street standard, I am not sure there is a law requiring it but your shareholders will probably demand it.
Don't know of any public, this is an interesting list of private (you're likely already aware of) https://baremetrics.com/open
In working with public company CFO's, I would guess 50% of the time & effort that goes into quarterly reporting is making sure everything came out of the SAP system correctly.
How would you goose the numbers in real time without an army of people curating what was reporting? Accounting is a bit of shell game at these levels, is it not? That is, we move one loss to this column, a gain to that column and suddenly we don't look __as bad__ as we were going to just a few minutes prior. Doing that in real time is super problematic.
I don't know, one hand I feel that exposes risk of versatile trading, on the other hand it doesn't seem like anyone would care, because growth/number is micro by seconds, and it takes days to see real spike.
I'd rather own snapchat personally. Think it has more upside than the rest of those combined. Only one close is twitter. You don't buy a company like snapchat for a 20% return, it's 5-10x return or bust.
I would most certainly buy $SNAP over every one of these companies. People don't get it. For everyone between the ages of 13 to 26, Snapchat is their only social network, their only messaging app, their go to camera! That is inherently more value that any of those companies combined.
Can't tell if sarcasm -- Snapchat is not the only social network that people from ages 13 to 26 use. Out of all the apps I deleted to study for finals, Facebook's Messenger was not included.
Then, they will try to - let's say - organize an event and will realise Facebook might not be fun, but damn useful to do this kind of stuff. Snapchat is not a social network, it's just a camera app. It's just a feature easily cloned by Facebook, and Facebook will end up winning just because of the network effect they can count on globally, and across nearly all demographics.
Facebook is big, it's everywhere. That's not cool for teens. Being different is what teens want. This can backfire on snap too if there is something even "cooler".
I will definitely buy some SNAP after they employees sell like crazy in desperation. I am optimistic about future value of SNAP and pessimistic about Facebook
So it's the AOL messenger, ICQ, Myspace, etc of 2017? What makes you so confident that Snapchat has the characteristics of a consolidating social platform like Facebook - in that its current user base will remain loyal to it as they age?
I don't believe you're correct. I don't know about the lower end of that range, but in the US, the higher end of that range uses Instagram and iMessage heavily as well.
[Net Loss] 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.
This reads like they gave out $2 BILLION in RSU's that vested if the company went public. That is a pretty sweet payday.
EDIT: It is a sweet payday unless you can't sell the stock to pay the taxes owed right away. Then if SNAP tanks you have a HUGE tax bill and no way to pay it.
Snapchat was known for its unusual RSUs--they would evaporate in a set amount of time unless a liquidity event happened. Apparently, if there's what the IRS considers a substantial risk of loss, they're considered unvested and you don't have to pay taxes on them. It looks to me like the situation worked the same on the accounting side of things.
Can you go into more detail on this, or just provide a link/documentation so I can also look into it for our own startup? Sounds very cool/interesting.
But! SNAP is doing AR, Spectacles are a stroke of marketing genius, distributed to cool influencers, instead of boring geeks like Google Glass or HoloLens. \s
On the earnings call they reported 5 million snaps taken using Spectacles, and $8 million in revenue from Spectacles this quarter. Maybe 55-60,000 units sold (?). That was the only thing I was curious about on the call.
5 Million / 50K (worse if you use 65K) = 100 Snaps per spectacle over a 90 day period = 1 Snap per spectacle per day. Thats super low engagement. For one its not going to alleviate any growth concerns. I see an Apple buyout looming.
Spectacles aren't really comparable to Google Glass, they're more like an action camera, such as a GoPro, but dumbed down and really easy to use. What counts as high user engagement for such a product? It's the sort of thing you only take out for events and special outings.
If they are supposed to function as action camera, then they are probably the lousiest ones ever designed/made. While I am sure the weather is always perfect at the Venice beach with enough sunlight. For nearly all other scenarios, where you might want a camera, you might NOT want to wear sunglasses. This is the reason why Google Glass had detachable attachment for sunglasses. The fact that they are tied to sunglasses, makes them useless in most other situations.
How are you going to wear sunglasses (unless of course you are on a beach) to any indoor or late night event/outing without looking like total douchebag??
I'm not sure you understand what action camera's are for, they're not for late night events, that's what the camera on your phone is good for, and you already have one of those. I've taken them Rock climbing, I took them out on a trail ride, I took them to the zoo, Everybody in my town is hockey crazy, I got shots of fans going nuts after a game. I shot a little cooking video, and they were actually coolest for that (or any type of instructional video)- they're simple enough that your grandma could make a cooking video, edit it, and share it.
The downside is you can't really get the video up on youtube or somewhere where it can easily be shared with anyone other than your Snapchat friends. But whatever, there's probably a half dozen Shenzen startups cobbling together open source Spectacles knockoffs as we speak.
Although Soviet filmmakers in the 1920s disagreed about how exactly to view montage, Sergei Eisenstein marked a note of accord in "A Dialectic Approach to Film Form" when he noted that montage is "the nerve of cinema", and that "to determine the nature of montage is to solve the specific problem of cinema". Its influence is far reaching commercially, academically, and politically. Alfred Hitchcock cites editing (and montage indirectly) as the lynchpin of worthwhile filmmaking. In fact, montage is demonstrated in the majority of narrative fiction film available today. Post-Soviet film theories relied extensively on montage’s redirection of film analysis toward language, a literal grammar of film. A semiotic understanding of film, for example, is indebted to and in contrast with Sergei Eisenstein’s wanton transposition of language “in ways that are altogether new.” While several Soviet filmmakers, such as Lev Kuleshov, Dziga Vertov, Esfir Shub and Vsevolod Pudovkin put forth explanations of what constitutes the montage effect, Eisenstein's view that "montage is an idea that arises from the collision of independent shots" wherein "each sequential element is perceived not next to the other, but on top of the other" has become most widely accepted.
Beats me. Maybe they have a warehouse full of them they can't get rid of. Maybe they can barely keep up with demand, I don't know. They're very cheap, it's a minimum viable product, but I'm expecting some next gen product from Snap somewhere down the line that may include some sort of HUD if not full on AR, based on their patents.
I hadn't been to the Venice boardwalk in quite some time, and I didn't even know that Snap had opened up a Spectacles store there, but when I went last month I was surprised to see that on a beautiful Saturday afternoon the only store in the entire mile plus long stretch that was completely empty aside from employees was the Spectacles store.
It was actually kind of disconcerting. For anyone not familiar with the Venice boardwalk, it is jam packed with stores selling overpriced food/drinks and kitschy tourist stuff. Most of the stores are small, packed with merchandise, and overflowing with people. The Spectacles store is probably one of the larger ones square footage wise, and has very prominent frontage. I've been in the area a few times over the last month and it has always been either completely empty, or almost completely empty.
So, let me get this straight: they expect to able to be a viable advertising outlet for brands, despite having no demographic targeting besides a rough guess at geolocation?
Hey, cool.
Good thing you're paying Google and Amazon about $200 million a year while your user growth plateaus!
They can analyze which stories you look at and subscribe to, which branded lenses/stickers you use, and I'd be surprised if they weren't using facial recognition to analyze selfies to look for age/gender/etc data
Tech companies, and startups in particular, are touted as the powerhouses of American innovation and economy.
And yet, it seems that the past 5 years of economic activity have been illusory. I expect a similar fate of Uber and Airbnb. Once the dust settles only the staid big co's shall remain.
It's a good point. But I'm alluding more to budding companies, not established companies. Granted Facebook didn't IPO until 2012.
But, as far as I can tell the software industry has contracted into those big 5 tech firms. The siren call of working at a startup and making it is sounding strident.
Knowing what you know now, what startup, if any, would you have joined 5 years ago?
I think it's getting harder and harder to justify. Especially given what mid-career devs at these companies are earning. $150-200k base plus 100k/yr or more in stock after a few years, that's far cry from 90k + 0.1% of some junky seed company with about a 1% chance of IPO.
If you look at my comment history you'll see I've been saying this for a while and I think it'll only get more true with further industry consolidation, which will make it both harder to displace incumbents product-wise, and harder to compete with them salary-wise.
Not everyone joins a start-up to make millions. Some will join just to make a living. There are plenty of startups that can provide a living for a few people with the potential for a bit of nest egg later on. That and the sense of involvement/freedom can be more attractive than a job at big co
I travel frequently, for both business and pleasure. Over 120K miles flown last year; 100+ nights away from home.
I've basically stopped using AirBnB entirely unless there is a 2x difference in price between a comparable hotel.
AirBnB is suffering the same product issues as Uber. Most of the listings now are from professional hosts with multiple properties. This is especially true in "hot" cities. As a result, quality of rentals have really declined from a few years ago, and anecdotally, the prices have also gone up - with all the various fees, it's really not that much cheaper than a hotel. And worse than a hotel, you have little to no recourse when something goes sideways.
I take Uber or Lyft, whichever is cheapest. The ride "sharing" industry is a brilliant innovation, but I seriously doubt it can support Uber's valuation.
Would you please not create bulk accounts to post with here? Throwaways are fine if there's some specific purpose, e.g. something personally sensitive, but we ban users who do it routinely. Hacker News is a community. You don't have to use your real name, of course, but users should have some consistent identity that other users can relate to. Otherwise we may as well have no usernames and no community, and that would be an entirely different forum.
What is a bulk account? I don't see mention of it on the site guidelines or anywhere else.
I personally don't want to have an identity on the web. If that's against the rules could you kindly point it out to me?
That's definitely something I'd be interested in learning about.
By bulk account I mean making numerous accounts, each of which is used for a few comments and then discarded.
It's not in the guidelines yet but it will make it in there eventually. In the meantime, it's against the rules in the sense that we don't allow it, and ban accounts that do it, for the reason I explained above.
Lets not forget that Facebook lost a lot lot of money before finally discovering a way to monetize its services. This is SNAP's first public earnings report.
Over 1000 Googlers were cranking on Google Plus, which at the time was a Facebook copy cat.
What makes Facebook so threatening to Snapchat is the aggressive cloning in tandem with it's pre-existing, larger network.
By the time Google decided to clone Facebook, the Facebook Graph was already more powerful than the GMail graph (which is what Google Plus was built on).
Facebook copycat? It was poor take on Facebook. Bad design, bad decisions, bad UI and bad UX. There was no vision for it, Google Plus would be much better as LinkedIn killer than Facebook killer.
With a company like SNAP, it's not a matter of monetization. It's a matter of growth. SNAP better get its act together or it's gonna end up like YHOO or TWTR looking for another company to buy it out.
FB grew at a faster rate than SNAP from a much bigger base.
They lost $2.2billion on revenue of $150 million. Ouch (and yes those RSUs very much count). Even on an EBITDA basis they lost more than they had in revenue.
They've got to turn the ship around. With user growth rather anemic they're not going to easily "grow" their way to profitability. They need to sort the fundamentals of the company to get the costs in check.
Problem is even if they had 50% margin today they'd be valued at a very rich valuation. Long story short there's not much in the fundamentals other than pure hype holding up the value of the stock at this point.
I wonder if they're hobbling their user growth by not having some alternative lite app. I've come to associate their app with poor performance and battery drain while Facebook apps are relatively fine, perhaps with the exception of Messenger which they're slowly releasing Messenger Lite as an alternative.
Hmm, that isn't the first time I've heard of that, but the Facebook app only constitutes about 3% battery usage for me. Either way for Facebook and Instagram you can just use the mobile web versions, but Snapchat doesn't have such an official site.
Can you not discount a lot of companies like this? Google makes a web page (after all, that's where most of their revenue comes from), Apple makes just a phone (that's where most of their revenue comes from), etc and they are many times bigger than any conglomerate.
One of the funnier parts is that for revenue, they grew +286%. for losses (which +2200% if you include the stock comp), there is no percentage listed, just "NM" (Not meaningful)
Absolutely disgusting. An issue with tech in general is the equity rewards are far too generous - especially at the top. I have direct plays in a few technology companies I admire and some of them annoy me with the ridiculous grants. We're looking at like 10% dilution over a year for some companies that aren't profitable. And it seems very concentrated at the management level.
For SNAP it's especially bad considering that the common shares are non-voting if I recall.
Amazing how you can have a $2 billion loss which represents a 2000% growth year-on-year and which is 15 times higher than the revenue and yet you label it as NM (Not Meaningful).
Plenty of Snapchat users (the ones who created the hype) are no longer teenagers. They are moving away from Snapchat to more concrete (perceived adult-ish) platforms like Instagram or not use them at all. Snapchat failed to evolve their product. I mean seriously do we really need those creepy glasses to record whomever you want?
> Adjusted Ebitda Loss $188.2M, Est. Loss $176.9M
> 1Q Daily Active Users 166M, Est. 168M
> 1Q Rev. $149.6M, Est. $158.6M
> 1Q Loss/Shr $2.31
I'm guessing the big issue is the miss on Daily active users. This is the same thing that caused the street ot hammer twitter.
Rule of thumb for non profitable tech companies....
If you are a company that isn't making a profit and you continually preach look at the users, look at the users. and then fail to even hit your target on that, you're going to get punished.....heavily.
Or put another way, you can either make a profit or make your non GAAP numbers, but you have to atleast hit one of the two.
One other issue from the Bloomberg momentary....
> A very key number here is revenue per user. Snap's results today are indicating average revenue per user at 90 cents. This is down from $1.05 (14%) from what it reported for Q4 2016, before its IPO.
To be completely fair, SNAP management wanted full control to build for the long term and Facebook was down 12% after their first earnings report and Twitter was down 24% so it might just be that its painful for rookie CEOs to manage a public company.
Too bad for employees that this comes before the lock up period ends.
EDIT
Just on the earnings call, they said they don't break out Spectical's numbers but the revenue it generated was about $8 Million.