The Illogical Snap, Possibly Irredeemable

This is a Short Note.

Snap, the owner of Snapchat, may not be redeemable. The company seems to lack vision. From Fortune Magazine newsletter, I quote:

Snap’s shares are set to open … after it reported that its quarterly loss nearly quadrupled and said increasing competition from Facebook hit user growth. Revenue rose to $%182 million from $72 million a year earlier, but the net loss hit an eye-watering $443 million, up from $116 million. CEO and co-founder Evan Spiegel tried to cheer investors up by reminding them that slower user growth meant lower Cloud data storage bills in the short term. He didn’t succeed

Essentially, the company is wishing that it does not grow user base so that it can save on computing bills. I mean Snap wishes that it does not add more users to avoid spending on supporting user growth.  For an American public company that depends on network effect, possible with huge user base, to execute its business model, this is extremely worrisome. This company has lost its vision.

When you read a portion of  a statement credited to Evan, you will wonder if it is not time to be looking for a new CEO for Snap.

A sudden influx of users is “just not appealing at this stage of the business,” Spiegel said. He didn’t say what cloud hosting providers he was referring to in terms of the big bills, but Snap has previously agreed to spend $1 billion over the next five years on Amazon Web Services.

If Snap does not want to be growing users, it simply means that Snap is done. You cannot make up lack of vision any better than this.The statement is illogical, and could put many people wondering if Snap can be saved, even in the midst of competitive onslaught from Facebook.

Just as Fortune noted that Wall Street was not convinced on the argument, I do not buy it also. Snap ended the day down 14%

Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.