🔒 SNAP defies forecasts of premature demise

LONDON — It has been a tough year for Snap, maker of the photo messaging app Snapchat, as it lost users to competitors like Instagram. It didn’t help when a Kardashian influencer tweeted that she did not open Snapchat anymore. The company managed to stem the flow by the three months to end December with the latest results beating Wall Street estimates. Losses were curtailed to $192m on revenue of $390m. This compared favourably with a loss of $360m on revenue of $286m a year before. Forecasts of Snap’s premature demise were obviously overdone, and shares jumped 25% on the numbers. Technology columnist Shira Ovide explained to Bloomberg’s Lisa Abramowiscz and Paul Sweeney why Snap managed to turn it around… – Linda van Tilburg

Basically, if SNAP isn’t a disaster at this point then investors are happy.
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Really happy.

That is a very low bar. It’s the lowest bar you could possibly imagine so, basically what SNAP said was the numbers of daily users didn’t shrink in the fourth-quarter, hooray. That revenue grew better than the company had forecast and that analysts had expected that the very steep, financial losses are narrowing and SNAP also said that they’re seeing stability, both in their business and in their executives ranks – this is a company that has turned over quite a lot of executives since it went public, including recently, the CFO left after being in that job less than a year.

Wow, also, I have planned, a very high short interest , I’m sure that I’m covering here but I guess really the issue is, for a lot of investors, the bears and the bulls are trying to figure out whether there’s really a place for SNAP in the digital ecosystem. Did you hear anything on the call or anything in the results that kind of gave you a sense of which way that might go?

I think you’re right that that is the big question. So, SNAP made a decision, which was an interesting decision to go public in 2017, when it was still very small. The revenue was very small and it had just started basically, it’s advertising business. So, it was definitely in the very early stages of development and any investors who bought in were basically buying on promise rather than a track record of results. So, it does seem like SNAP has show some promise with advertisers in those young users that are the core of Snapchat’s audience but I don’t think they’ve proven yet whether this company is going to be a permanent fixture either in the lives of users around the world or in the budgets of advertisers around the world.

You guys are being so politically correct. All I think about is, why is this a company, at a certain point, and why is it a stand-alone company, especially as Instagram becomes the number one most popular site. It’s not as if SNAP is the biggest gainer, when it comes to people who want to have rainbows coming out of their mouths. But really, how are they doing with the competition with Instagram?

Instagram is the big risk amongst the big risks here. SNAP has 185m daily users – that is nothing to sneeze at and even though Instagram has essentially copied SNAP and all of SNAP’s best features;  there is still a loyal audience at Snapchat that is there, using it avidly, kind of 30-minutes a day, which you could make a business out of that if you’re good at making money and SNAP hasn’t yet proven that it’s good at making money.

Let’s talk about a company that’s very good at making money, Apple.

A good transition.

Thank you. It’s interesting that one of the areas of Apple it seems like their retail presence has never kind of lived up to what maybe they would like it to be when you think about well then do with product design, and innovation. I think their stores are pretty cool and a fun place to spend some time but there’ve been some turnover in the ranks here, and I guess there’s a new person running the stores and what’s kind of going on there? Is that to try to right a wrong perhaps?

Yes, look, I don’t think we know what happened but yesterday Apple said that Angela Ahrendts, who’s the former Burberry CEO, the fashion house’s CEO, who had been there for five-years, running their retail stores. She’s going to leave and her position is being absorbed by the executive who heads human resources. So, it’s a little bit of an odd-fit. I don’t really know why Angela Ahrendts is leaving. Apple didn’t really give a good reason other than to say, she had served other personal and professional interests. But I think this is an interesting moment for Apple retail stores – they were very important for Apple in the early days, including when they launched the iPhone. There were a lot of people who were relatively unfamiliar with Apple products, right. That was a company that always had a very, very small share of the personal computer market and the retail stores were incredibly important to introduce Apple’s products to a wider audience. Now that Apple’s product audience is pretty big; there is a kind of an opportunity to rethink, ‘what do they want the stores to be?’ Are they these fancy product show cases or should they be something else now that Apple is talking less about selling gadgets and more about forming long, lasting relationships with its customers and selling them more software subscriptions over time?

Yea, I also wonder how much this has to do with the fact that she was one of the people who wanted to keep prices high and decided not to discount things during Black Friday, etc., but opt for other types of inceptives and really try to cater to that luxury customer.

That’s consistent with her background.

And that kinda backfired with respect to the pricing of the iPhone X, just saying that could be part of it.

Yeah, it’s a fair question and I don’t really have an answer to it. I can only say that it is definitely true that Apple has been more aggressive about doing things like discounts – ‘gasp’ that if you go to Apple.com you can see very prominently right now that…

I’m not going to get a Groupon for an iPhone, am I?

Okay, if you get a Groupon for an iPhone, let me know, then you know that things are in a really bad shape.

And that was a Bloomberg discussion with analyst Shira Ovide on SNAP earnings with stock up 25%.