Snap Inc (NYSE:SNAP) Still a Mediocre Social Media Platform 2 Years into the Stock Market
Wallstreet believed that Snap Inc (NYSE:SNAP) was the next big thing after Facebook immediately it went public in a successful Initial Public Offering (IPO). The company had seen a market gap and leveraged on it- appealing to a class of young users Facebook had neglected. Two years down the line, Snap is trading way below its all-time best price of $24.50. In the recently ended business day, the stock closed at $9.92 giving the company a valuation of $12.95 billion- down several billion its valuation during the IPO.
In all fairness, no one expected Snap to tower Facebook in a year considering the company’s management had promised investors long-term viability. Snap was already burning through cash the time it went public, but this was expected to stop after the successful IPO.
Snap’s Advertising Model
One thing that everyone expected of Snap was a rapid user and business growth over time- that should be showing after two years. After the company went public, first, it changed its advertising model– instead of using salespeople; the company chose to sell ads programmatically using software-generated algorithms. This in effect lowered ad prices and revenue subsequently. This explains the sluggish business growth to some point.
Next on the list of mistakes Snap made was the botched 2017 redesign of the Snapchat app. Using the same “future viability” narrative, Snap rolled out a redesign of its app a move that infuriated its users. Snap not only lost existing users, but it also failed to impress new users it sought to attract. Instead of enhancing user experience Snap pissed off its users-dirt that has not been easy to clean. Snap learned painfully the importance of adequate survey before making such changes. The company has since rolled back some of the initial features in a bid to appease its users.
Snap has suffered a combination of sluggish business and user growth, which as earlier mentioned has deflated its stock over time causing negative anxiety among investors. Perhaps two years was not enough for Snap to prove itself worthy- maybe the company will pull a turnaround in the third year. Snaps’ last quarterly earnings point to a promising company– well, perhaps not one that will topple Facebook soon but one that is worth not giving up on this soon.
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