Snap’s judgement: what to look out for

Snap, the company that owns Snapchat, is posting its first earnings as a public company on Wednesday.
Silicon Valley will be keenly watching – it’s the first glimpse at how the company may perform long term, and it comes at a time when the company faces an existential threat from its biggest, perhaps only, rival: Facebook.
When Snap floated on the market in March, its price surged by 44% to give it a value of almost $30bn.
But make no mistake, Facebook’s F8 recent developer’s conference was an onslaught on Snapchat’s future. The disappearing messages app, popular with teens, has seen its core features lifted wholesale by Facebook’s engineers and offered to its own 1.9bn users, a figure which dwarfs Snapchat’s base.
Facebook’s own head of messenger, David Marcus, admitted to me that Snapchat got there first with innovation in ephemeral messaging and augmented-reality filters – but the message from him was essentially: what does it matter? Facebook thinks it can bring the technology to the next level, crushing Snapchat in the process (something you suspect Mark Zuckerberg has had his eye on ever since he was snubbed by Snap founder Evan Spiegel).
Getting bigger
The key thing to look out for on Wednesday is Snapchat’s user growth, though as I’ll explain in a moment, it won’t be the whole picture.
An inability to attract new users has continually hobbled Twitter on Wall Street, and it’s growth that will most likely dictate which way Snap’s shares go in after-hours trading. It’s not expected to be good news – the company has already warned growth is slowing, a symptom of saturation in its core market, the US.

That warning came amid intense competition from Instagram, the Facebook-owned messaging app that launched its own version of Snapchat’s “Stories” feature in the middle of last year.
“Snapchat’s growth is being cannibalised by Instagram Stories in literally every single market in the world,” according to ValuePenguin, a financial research service.
But Snap can’t blame all its user abandonment on Instagram or Facebook. In India, a massive campaign to boycott the app took hold after Mr Spiegel was quoted as saying he didn’t want to “expand into poor countries like India”.
Snap disputes the accuracy of the quote – but nevertheless, Snapchat’s user rating in the region plummeted. If Snap decides to break out user numbers region-by-region on Wednesday, we may get an indication of just how damaging that boycott has been.
At the last official count, Snapchat had 160m active daily users (Instagram Stories had 200m).
Discovery delivering
But Snap will be able to get around having relatively few users by proving that those users are both young and keen to engage.
Key to this is its Discover tab, where bespoke content from major publishers is shared, peppered with ads. According to a recent piece in the New York Times, publishers like Mashable are very impressed with Discover so far – considering it an “important source of revenue”.
Contrast that to how some publishers feel about Facebook. USA Today recently asked the FBI to investigate the proliferation of bots on the platform after estimating that almost half of its Facebook following were spam accounts.
The last official figure we had on how many people were viewing content on the Discover tab was 100m per month. Expect that to go up, and expect it to be the company’s favourite metric on Wednesday. Investors will be even happier if Snap announces some new exclusive deals for video because, you guessed it, Facebook is breathing down its neck on that front, too.

Source:BBC