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Vanishing app: Snapchat struggles as Facebook bites back

Is Snapchat – the social media app famous for its disappearing messages – in danger of doing a vanishing act of its own? It’s a question some are asking after investors turned on the company again this week following a second set of poor results which have turned a once-hot tech company into a stock market casualty.

The losses alone were steep. Snapchat’s parent, Snap Inc, lost $443m over the last three months, compared with $116m for the same period a year ago. Young tech companies are expected to burn through cash at a prodigious rate as they chase customers, but the main worry for shareholders was anaemic user growth, missed revenue targets and the threat from Facebook and Google – both of which have copied some of Snapchat’s key features. Imitation may well be the most sincere form of flattery, but in this case it could also be the most deadly.

On top of these woes, Snap has a money problem. Wall Street cares about revenues in a way that Silicon Valley doesn’t. Life has changed for Snap Inc and its newly minted billionaire co-founder, Evan Spiegel, since the company went public in March.

According to market watchers, the Los Angeles-based business has to work out a way to make money – fast – before rivals eat its lunch. “There is a lot of heavy competition and the company has not figured out how to monetise its audience yet,” said Salvatore Recco, of advisory firm 50 Park Investments. “Until they do, investors will likely continue to be disappointed.”

Investors want to know how much money the company will make, and when. This quarter they were let down again. With its young, mobile-obsessed users Snap offered advertisers a way to reach the all important millennial market. But the business, whose main offering is a messaging service where people can...


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