Snap’s Probably Screwed (Again)

When Snap’s Q2 earnings came out earlier this week, the stock immediately dropped 17%. The company had a 22% jump in infrastructure costs, its revenue was down 4% year over year, and it’s spending $317M a quarter on stock-based compensation.

How did it come to this? In the last year the company has launched GenerativeAI products and a new subscription product, the latter of which has 4M users. The much-predicted recession hasn’t materialized. These are all things that should supposedly make this business hum. Instead, the results were the lovesong of a cat with tinnitus (abysmal, off pitch, very bad). 

The answer to the consistent underperformance is simple. The company has failed to address all of the things that were broken a year ago—and the year before that and the year before that and the year before that. 

364 days ago I published a piece arguing that “Snapchat’s Probably Screwed.” Today is a follow-up to that original post on what I got right (and wrong). I would propose the company is guilty of two primary sins: 

• Using the placebo of “innovation” to hide lackluster growth
• A broken monetization model