So why is Snap, Inc. calling itself a “camera company”? (That’s how the tech giant described itself in its S-1 filing, released
this week).
Maybe because Snap doesn’t want to rely solely on advertising for its financial well being, suggests Brian Wieser.
“While the description may illustrate
[Snap’s] intention to diversify more significantly away from advertising in the future, if the company does intend to [do so], it reinforces the early-stage nature of company at the present
time,” the Pivotal Research analyst reasons in a new investor note.
As Snap revealed on Thursday, advertising accounted for 96% of its revenue in 2016.
Among other reasons, Snap
may be thinking bigger than ads because of their seasonal nature. In fact, it expects a “seasonal decline” in revenue in the first quarter of the year compared to the fourth quarter of
2016.
“Until we see the significance of the decline, it will be difficult to assess how meaningful this distinction is,” Wieser notes. Snapchat users are not growing at a
“particularly robust pace,” he adds.
During the fourth quarter, the network recorded 158 million daily active users (DAUs), which was up only modestly from the 153 million recorded
in the third quarter of last year. In North America, DAUs increased from 65 million in the third quarter to 68 million in the fourth quarter, last year.
Wieser suspects Snap’s audience
is likely aging -- citing the company’s admission that over 50% of “new” daily active users are over the age of 25.
Also of note, 91% of Snap’s ad revenue was generated
by the company itself last year -- rather than from its partners.
“This distinction is worth noting as Snap shifts the focus away from revenue-share arrangements with content partners
towards licensing arrangements, which requires an appropriate balance to ensure content partners are incented to produce more content for Snap,” Wieser adds.
Among other experimental
revenue channels, Snap recently
unveiled Spectacles:
stylish video-recording sunglasses that are expected to retail for $130.
This column was previously published in Moblog on February 3, 2017.