Snap follows the path Twitter took

Snap completed a year as a publicly traded company, with mixed success. The company started off with an aim to be different from the social networking site Facebook and micro-blogging site Twitter. But Snap’s journey till date tells us a different story.

Being one of the hottest tech IPOs of that year, Snap — parent of photo-sharing app Snapchat — went to extreme lengths to be unique from both Facebook and Twitter. These efforts soon went in vain as Snap failed to impress the investors who soon began comparing Snap’s journey to that of Twitter.

Evan Spiegel’s company had to battle with similar issues that haunted Twitter for a long time. One being slow revenue growth, and the other major concern is the decline in user growth.

Let’s snap some numbers…

When Twitter went public in 2013 at $26 per share, it pocketed at least $1.8 billion, gaining a valuation of approximately $14 billion. Back then the future growth prospects of the company looked promising; however, the progress soon came to a standstill as the company struggled with slow revenue and user growth leading to a drop in its valuation.

Similar to Twitter, Snap celebrated a successful IPO where it priced its shares at $17 apiece, valuing the company at $23.8 billion, but then it gradually struggled with slowing user-growth and lesser than expected revenue numbers. Like Twitter, Snap has been struggling to shrug off its worries, with no much success. In fact, both the companies entered 2018 with similar valuations. Snap was valued at $18 billion, and Twitter stood at $18.16 billion.

When Jack Dorsey was named the CEO of microblogging giant Twitter, one of the significant moves by him was the layoff of up to 336 employees — a move that happened when Twitter was setting itself up in a new direction. Snap took a similar drastic step recently when it decided to lay off employees that are a part of its engineering team, an indication that the company is re-aligning its efforts to remake itself.

This year, Twitter lost one of its critical executive COO Anthony Noto. This was a huge blow for Twitter as Noto managed most of Twitter’s business. He was known for running the show rather than Dorsey. He was instrumental in getting Twitter some major content deals. Snap matched up with Twitter in this case too. Snap has not been lucky either when it comes to retaining top executives. Recently the company’s vice president of product Tom Conrad exited the company. He was known as the decision maker at the company and a close associate of Evan. Both Twitter and Snap lost their key executive at a crucial time as both the companies were steering the future toward a promising vision.

Twitter lost a lot of money. Before going public, the company had accumulated close to $400 million in losses. But the losses multiplied after IPO due to the stock-based compensation given to the employees. Snap on the other hand lost its money when it launched its first hardware product. The company made an overestimation of its Snapchat’s new spectacles that were sold for $130. But the consumer base failed to grow, and the unsold spectacles accounted for $39.9 million loss.

It took a long time for Twitter to turn to profit and shut down its troll. The latest quarter marked the company’s first positive quarterly income.  The net income for Twitter came in at $91 million with revenue up 2% year-over-year to $732 million. However, the company’s monthly average user remained flat quarter-over-quarter at 330 million and up 4% year-over-year. Things are improving for Snap too. The company witnessed a 5% sequential growth in its daily active users; this is the highest since 2016. On a yearly basis, the company’s daily active users rose 18%.

Despite the new features Twitter is still seen as the same old platform. Snap also attempted to redesign its app, but it received harsh criticism from users being confusing and complicated.

Both the companies certainly have room to grow. From here, the direction they will take will determine their survival.