Snapchat is Maturing – Page 2

Narrative: Snapchat is Maturing

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★ Snap Reports Q2 Earnings with Slow User, ARPU Growth, Slightly Better Margins (Aug 10, 2017)

Snap Inc reported earnings for Q2 2017 this afternoon, and it missed analyst consensus estimates pretty much across the board, with lower user growth, ARPU, and therefore revenue, as well as EPS, than expected. Snap’s user growth sequentially was 7 million, a little above its Q4 2016 number but below every other quarter’s growth for the last two years. Interestingly, in a reversal of the recent trend from Facebook, it saw better growth in North America, where its ARPU potential is much higher (currently 5x Europe and 7x Rest of World) but costs to serve are more or less the same than in its two other regions. But if user growth is going to remain slow, ARPU really has to grow rapidly, and it’s not yet seeing the kind of ramp it needs in that trajectory to justify rising expectations of its future performance. Though it saw 60% of its recent ad impressions generated through its self-serve and automated (API) platforms, the increased inventory made available through those platforms has generated lower prices per ad, so even though impressions went up quite a bit thanks to increased time spent and modest user growth, that offset it somewhat.

Management commentary on the call was mostly focused on the new creative tools being made available to users, which have historically driven increased engagement, as well as the evolving ad platform, which is the other major component to driving ARPU up. But the evidence from the Q2 reported numbers suggests neither of these is dramatically changing the trajectory from prior quarters. There is still tons of headroom in ARPU – Facebook’s global ad ARPU is over four times Snap’s, while its North American ARPU is roughly ten times as high – but Snap is a long way from reaching that level yet, with relatively modest increases in North America in the quarter and better growth overseas. My basic thesis on Snap remains the same: it’s a platform with a slow-growing and smallish (relative to the ad giants) base of highly-engaged users heavily skewed toward particular demographics. That will continue to be attractive to those looking to reach those demographics, but will continue to fall short of the appeal of the much bigger audiences and more sophisticated ad tools available at Google and Facebook. I don’t see any of that changing soon, which means Snap is best seen as its own animal, at similar scale to Twitter (though that scale is measured differently) and with some of the same problems. In other Snap news today, Mashable’s Kerry Flynn reports that it has apparently acquired selfie drone company Zero Zero Robotics. There was no mention of this on the call, but if I heard correctly management did mention roughly $200 million in acquisition costs in the quarter, which would gel with this reporting.

via Snap

Snap

Snapchat is Maturing

Snapchat’s New Ad Tools and WPP Spend Comments Drive Stock Price Higher (Aug 4, 2017)

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Snap

Snapchat is Maturing

Google Has Reportedly Had Informal Talks to Acquire Snap for $30 Billion (Aug 3, 2017)

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Snapchat is Maturing

Snapchat is Partnering with College Newspapers for Campus Content (Aug 1, 2017)

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Snap

Snapchat is Maturing

Snapchat Launches Daily NBC News Show (Jul 19, 2017)

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Snapchat is Maturing

Weekly Narrative Video – Snapchat is Maturing (Jul 15, 2017)

This past week’s narrative video is on the Snapchat is Maturing narrative, which feels very relevant as Snap Inc’s share price drops below the IPO price and questions continue to arise about its long-term potential. As usual, I’ve updated the accompanying essay to reflect what’s happened since I first wrote it six months ago too. Subscribers can watch the video on the narrative page here as always, and if you’re not yet a subscriber you can sign up for a 30-day free trial here and get access too.

Snap

Snapchat is Maturing

Snapchat Is Looking for Ad Tech Acquisitions, Has Talked to AdRoll (Jul 14, 2017)

Business Insider reports that Snapchat is looking to beef up its ad tech capabilities and has had discussions with AdRoll as a possible candidate, though those talks seem to have ended at this point. This goes to the heart of one of the big weaknesses Snapchat still has as an advertising platform, namely its inability to give advertisers the insights they want into how their ads are performing or the impact they’re having. That, combined with the lack of user growth, means Snap’s future growth prospects are challenged, and that in turn explains the recent hit to the stock price. The right acquisition (or several) in this space would help change that, but many of the best assets in the market have long since been snapped up (or developed internally) by the major players, so the pickings will be slim and the benefits of an acquisition less than they might once have been.

via Business Insider