Snap doesn’t know how to make money. Well, it doesn’t know how to make a lot of money while not spending so much money. When the company went public earlier this year, it openly admitted that it may never become profitable. So there’s no surprise in seeing Snap’s struggles continue into the third quarter of 2017.
Snapchat and the Spectacles, the only two products offered by Snap, aren’t generating enough revenue to cover anywhere close to the company’s expenses.
The third quarter this year was even worse than the same time last year. Snap’s revenue increased to $207.9 million, but its expenses grew big-time. Expenses for the last quarter were almost $670 million. So that led to a net loss of $443.1 million. The company says its advertising business is on the rise, but currently it’s not providing decent returns.
A big part of Snap’s loss came from the Spectacles. The pair of smart glasses caused the company to lose nearly $40 million. You may recall that, despite outselling the original iPod, there’s a massive amount of unsold Spectacles sitting in warehouses.
Only a little over 150,000 units of the smart glasses were sold as of October 2017. Based on the write-down reported, it appears there are in the neighborhood of 300,000 pairs remain on-hand. Snap could be launch a fire sale for the Spectacles in the coming weeks as holiday shopping is underway. Still, it’s not a good sign for a company that has a 150-person hardware team.
Globally there are now 178 million daily active users on Snapchat; however, growth from quarter-to-quarter has noticeably slowed down. The new figure is up just 3 percent from Q2 2017. Instagram, which is owned by Facebook, has 300 million daily active users on its Stories feature alone. Since Instagram Stories debuted in 2016, Snapchat’s been losing steam. The release of the Spectacles provided a surge in interest for the brand that’s long gone now.
Snap’s financial results for Q3 2017 are bad, but CEO Evan Spiegel revealed change is on the way. A redesigned Snapchat app will be released for both iOS and Android. The decision comes as Snap realizes that Snapchat is way too difficult for everyone to understand.
Here’s part of what he said:
“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behavior of our community will change when they begin to use our updated application. We’re willing to take that risk for what we believe are substantial long-term benefits to our business.”
Investors aren’t going to like hearing that things may get worse for they get better, and they’ve been angry with Snap’s leadership for months. Snap’s stock price plummeted more than $3 upon the financial results being shared. It’s been a similar story throughout Snap’s brief history as a public company.