Snap Inc Q3 2017 Increasing Costs Overshadow Progress
The 20,000 Foot View: Snap’s public performance has been turbulent and its stock price has been on a downward trajectory during its debut year under the forensic scrutiny of Wall Street. Share prices fell from during the March IPO, to in 2017. This has placed pressure on the management team to adopt a new strategy to, reassure the increasingly sceptical financial markets. Snap’s CEO Evan Spiegel, in the earnings call, made the point that the company will prioritise “Performance, Quality and Automation” in 2018. This will be done through increased monetisation of existing platforms, and the addition of augmented reality (AR) features into its existing services, as seen with the release of the Bitmoji lenses in September.
However, Snap’s escalating operational costs raises the question of whether its business model can adjust to an evolving market landscape for social apps while staving off AR competition from the likes Facebook, or whether it is likely to run out of time and the requisite resources. Snap faces the twin challenge of running a loss-led niche business model and a hyper-efficient and well-resourced competitor implementing all its best features directly to mainstream consumers.
- Quarterly revenue increased from million in 2017 to million in 2017, representing a increase over the period
- The daily active user (DAU) base grew from million in 2017 to million in 2017
- Total costs increased from million in 2016 to million in 2017 year-on-year
- Hosting costs as a proportion of the cost of revenue increased from million in 2016 to million in 2017, representing a increase of Snap ad impressions are now delivered through an auction platform as part of the strategic pivot towards programmatic advertising
- CPM rates have declined by year-on-year